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Perilous Reversal Stock: Vivus (VVUS)

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

  • VVUS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $17.9 million.
  • VVUS has traded 288,874 shares today.
  • VVUS is down 3.7% today.
  • VVUS was up 7.2% yesterday.

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More details on VVUS:

VIVUS, Inc., a biopharmaceutical company, develops and commercializes therapies to address unmet needs in obesity, sleep apnea, diabetes, and sexual health in the United States and the European Union. Currently there are 2 analysts that rate Vivus a buy, 4 analysts rate it a sell, and 3 rate it a hold.

The average volume for Vivus has been 3.5 million shares per day over the past 30 days. Vivus has a market cap of $536.2 million and is part of the health care sector and drugs industry. The stock has a beta of 1.53 and a short float of 39.1% with 10.45 days to cover. Shares are down 38.7% year-to-date as of the close of trading on Tuesday.

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 Vivus as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, generally disappointing historical performance in the stock itself and generally high debt management risk.

Highlights from the ratings report include:

  • 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 Pharmaceuticals industry and the overall market, VIVUS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio of 1.39 is relatively high when compared with the industry average, suggesting a need for better debt level management. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 6.94, which shows the ability to cover short-term cash needs.
  • VVUS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 59.83%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • VIVUS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VIVUS INC reported poor results of -$1.73 versus -$1.40 in the prior year. This year, the market expects an improvement in earnings (-$1.57 versus -$1.73).
  • The gross profit margin for VIVUS INC is currently very high, coming in at 93.50%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -38.95% is in-line with the industry average.

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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