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Today's Perilous Reversal Stock: Medivation (MDVN)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Medivation ( MDVN) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Medivation as such a stock due to the following factors:

  • MDVN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $164.4 million.
  • MDVN has traded 723,361 shares today.
  • MDVN is down 3.2% today.
  • MDVN was up 11.2% yesterday.

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More details on MDVN:

Medivation, Inc., a biopharmaceutical company, focuses on development and commercialization of novel therapies to treat serious diseases in the United States. It offers XTANDI for the treatment of post-chemotherapy metastatic castration-resistant prostate cancer (mCRPC) patients. Currently there are 10 analysts that rate Medivation a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Medivation has been 1.0 million shares per day over the past 30 days. Medivation has a market cap of $5.7 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.88 and a short float of 5.4% with 1.79 days to cover. Shares are up 18.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Medivation as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally high debt management risk.

Highlights from the ratings report include:

  • MEDIVATION INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, MEDIVATION INC reported poor results of -$0.56 versus -$0.56 in the prior year. For the next year, the market is expecting a contraction of 28.6% in earnings (-$0.72 versus -$0.56).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Biotechnology industry. The net income has significantly decreased by 193.4% when compared to the same quarter one year ago, falling from -$4.54 million to -$13.31 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Biotechnology industry and the overall market, MEDIVATION INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$4.50 million or 1531.15% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 3.40 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 3.69, which shows the ability to cover short-term cash needs.

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