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Trade-Ideas: Zogenix (ZGNX) Is Today's "Dead Cat Bounce" Stock

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 Zogenix ( ZGNX) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Zogenix as such a stock due to the following factors:

  • ZGNX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $14.2 million.
  • ZGNX has traded 76,202 shares today.
  • ZGNX is up 3.9% today.
  • ZGNX was down 14.5% yesterday.

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More details on ZGNX:

Zogenix, Inc., a pharmaceutical company, engages in the development and commercialization of products for the treatment of central nervous system disorders and pain. Currently there are 3 analysts that rate Zogenix a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Zogenix has been 2.6 million shares per day over the past 30 days. Zogenix has a market cap of $627.2 million and is part of the health care sector and drugs industry. The stock has a beta of 1.85 and a short float of 25.9% with 2.97 days to cover. Shares are up 28.2% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Zogenix as a sell. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:

  • The gross profit margin for ZOGENIX INC is currently lower than what is desirable, coming in at 27.64%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -151.40% is significantly below that of the industry average.
  • ZGNX, with its decline in revenue, underperformed when compared the industry average of 1.9%. Since the same quarter one year prior, revenues fell by 15.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Net operating cash flow has increased to -$9.62 million or 32.46% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -9.49%.
  • This stock has increased by 168.23% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in ZGNX do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • ZOGENIX INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ZOGENIX INC continued to lose money by earning -$0.64 versus -$2.07 in the prior year. This year, the market expects an improvement in earnings (-$0.51 versus -$0.64).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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