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Why Senomyx (SNMX) Is Soaring on Tuesday

NEW YORK (TheStreet) -- Senomyx (SNMX) is spiking on Tuesday after its Sweetmyx food flavoring was found to be safe.

By midday, shares had added 25.2% to $11.78.

San Diego-based Senomyx, which develops food and beverage flavorings, said its Sweetmyx ingredient had been determined to be Generally Recognized as Safe (GRAS) by U.S. regulatory Food and Drug Aministration (FDA).

Sweetmyx is a modifying flavor which maintains sweetness in foods and beverages in which the sugar content has been reduced. The ingredient will have several practical applications such as the inclusion in low- or no-sugar beverages such as Pepsi Max (PEP).

"The new Sweetmyx flavor ingredient will enable the creation of lower-calorie beverages and foods that have reduced sweeteners without sacrificing taste," said Senomyx CEO John Poyhonen in a statement.

"We are particularly excited about the versatility of Sweetmyx since it allows for the reduction of either sucrose or fructose in products. Senomyx is fully engaged with our partners as they evaluate potential product opportunities."

Senomyx currently has partnerships with PepsiCo and Firmenich to pursue commercialization of the flavor ingredient. The former has exclusive rights to use the flavor worldwide in all non-alcohol beverages. Firmenich has lifetime rights to commercialize the flavor for food product categories and alcoholic beverages with exclusivity until March 2018.

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TheStreet Ratings team rates SENOMYX INC as a Sell with a ratings score of D-. The team has this to say about their recommendation:

"We rate SENOMYX INC (SNMX) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SENOMYX 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. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, SENOMYX INC reported poor results of -$0.24 versus -$0.22 in the prior year. For the next year, the market is expecting a contraction of 16.7% in earnings (-$0.28 versus -$0.24).
  • 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 Chemicals industry. The net income has significantly decreased by 71.4% when compared to the same quarter one year ago, falling from -$2.03 million to -$3.48 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 Chemicals industry and the overall market, SENOMYX INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • SNMX, with its decline in revenue, underperformed when compared the industry average of 13.6%. Since the same quarter one year prior, revenues fell by 15.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • SNMX has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.45, which illustrates the ability to avoid short-term cash problems.

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