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Today's Dead Cat Bounce Stock: Medicines Company (MDCO)

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

  • MDCO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $42.2 million.
  • MDCO has traded 889,536 shares today.
  • MDCO is up 3% today.
  • MDCO was down 15.5% yesterday.

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More details on MDCO:

The Medicines Company provides medical solutions for patients in acute and intensive care hospitals worldwide. MDCO has a PE ratio of 120.1. Currently there are 5 analysts that rate Medicines Company a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Medicines Company has been 999,600 shares per day over the past 30 days. Medicines has a market cap of $1.8 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.11 and a short float of 8.2% with 2.40 days to cover. Shares are down 26.4% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Medicines Company as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income.

Highlights from the ratings report include:

  • The revenue growth came in higher than the industry average of 1.6%. Since the same quarter one year prior, revenues rose by 16.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • MDCO's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 2.74, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for MEDICINES CO is rather high; currently it is at 65.37%. Regardless of MDCO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MDCO's net profit margin of 0.64% is significantly lower than the industry average.
  • MEDICINES CO 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 two years. We anticipate that this should continue in the coming year. During the past fiscal year, MEDICINES CO reported lower earnings of $0.23 versus $0.94 in the prior year. For the next year, the market is expecting a contraction of 143.5% in earnings (-$0.10 versus $0.23).
  • 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 Pharmaceuticals industry. The net income has significantly decreased by 94.2% when compared to the same quarter one year ago, falling from $20.66 million to $1.20 million.

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