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

  • DEPO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $12.4 million.
  • DEPO has traded 158,438 shares today.
  • DEPO is up 10.5% today.
  • DEPO was down 15.6% yesterday.

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More details on DEPO:

Depomed, Inc., a specialty pharmaceutical company, develops products for pain and other conditions, and diseases of the central nervous system in the United States. DEPO has a PE ratio of 16.7. Currently there is 1 analyst that rates DepoMed a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for DepoMed has been 1.1 million shares per day over the past 30 days. DepoMed has a market cap of $724.1 million and is part of the health care sector and drugs industry. The stock has a beta of 0.85 and a short float of 7.6% with 4.12 days to cover. Shares are down 0.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates DepoMed as a buy. 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, notable return on equity, reasonable valuation levels and solid stock price performance. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

  • DEPO's very impressive revenue growth greatly exceeded the industry average of 5.2%. Since the same quarter one year prior, revenues leaped by 192.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • DEPO 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, DEPOMED INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Powered by its strong earnings growth of 400.00% and other important driving factors, this stock has surged by 125.35% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DEPO should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

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