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Stock To Watch: AVANIR Pharmaceuticals (AVNR) In Perilous Reversal

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

  • AVNR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $29.4 million.
  • AVNR has traded 347,954 shares today.
  • AVNR is down 3.8% today.
  • AVNR was up 6.1% yesterday.

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More details on AVNR:

Avanir Pharmaceuticals, Inc., together with its subsidiaries, is engaged in acquiring, developing, and commercializing novel therapeutic products for the treatment of central nervous system disorders primarily in the United States. Currently there are 3 analysts that rate AVANIR Pharmaceuticals a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for AVANIR Pharmaceuticals has been 3.0 million shares per day over the past 30 days. AVANIR has a market cap of $760.8 million and is part of the health care sector and drugs industry. The stock has a beta of 1.04 and a short float of 11.6% with 2.49 days to cover. Shares are up 50.3% 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 AVANIR Pharmaceuticals as a sell. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity.

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, AVANIR PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for AVANIR PHARMACEUTICALS INC is currently very high, coming in at 94.92%. Regardless of AVNR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AVNR's net profit margin of -47.04% significantly underperformed when compared to the industry average.
  • AVNR's debt-to-equity ratio of 0.97 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
  • AVANIR PHARMACEUTICALS INC has improved earnings per share by 33.3% 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, AVANIR PHARMACEUTICALS INC reported poor results of -$0.53 versus -$0.45 in the prior year. This year, the market expects an improvement in earnings (-$0.30 versus -$0.53).
  • The net income growth from the same quarter one year ago has exceeded that of the Pharmaceuticals industry average, but is less than that of the S&P 500. The net income increased by 23.3% when compared to the same quarter one year prior, going from -$16.53 million to -$12.68 million.

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