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ARIAD Pharmaceuticals (ARIA) Is Water-Logged And Getting Wetter Today

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 ARIAD Pharmaceuticals ( ARIA) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified ARIAD Pharmaceuticals as such a stock due to the following factors:

  • ARIA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $38.7 million.
  • ARIA has traded 3.4 million shares today.
  • ARIA traded in a range 221.6% of the normal price range with a price range of $0.41.
  • ARIA traded below its daily resistance level (quality: 199 days, meaning that the stock is crossing a resistance level set by the last 199 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in ARIA with the Ticky from Trade-Ideas. See the FREE profile for ARIA NOW at Trade-Ideas

More details on ARIA:

ARIAD Pharmaceuticals, Inc., an oncology company, is engaged in the discovery, development, and commercialization of medicines for cancer patients. Currently there are 5 analysts that rate ARIAD Pharmaceuticals a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for ARIAD Pharmaceuticals has been 8.5 million shares per day over the past 30 days. ARIAD has a market cap of $1.2 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.41 and a short float of 23.9% with 6.33 days to cover. Shares are down 7.6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates ARIAD Pharmaceuticals as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.

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 Biotechnology industry and the overall market, ARIAD PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • ARIA'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 66.57%, 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.
  • ARIAD PHARMACEUTICALS INC has improved earnings per share by 25.0% 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, ARIAD PHARMACEUTICALS INC reported poor results of -$1.49 versus -$1.34 in the prior year. This year, the market expects an improvement in earnings (-$1.05 versus -$1.49).
  • The net income growth from the same quarter one year ago has exceeded that of the Biotechnology industry average, but is less than that of the S&P 500. The net income increased by 22.9% when compared to the same quarter one year prior, going from -$64.67 million to -$49.82 million.
  • Net operating cash flow has increased to -$52.41 million or 23.43% when compared to the same quarter last year. In addition, ARIAD PHARMACEUTICALS INC has also modestly surpassed the industry average cash flow growth rate of 15.49%.

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