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Why DepoMed (DEPO) Stock Is Gaining Today

NEW YORK (TheStreet) -- DepoMed (DEPO - Get Report)DEPO was gaining 12.2% to $14.76 Tuesday after the U.S. District Court for the District of New Jersey ruled in favor of the drug manufacturer in is patent lawsuit against Actavis (ACT)ACT.

Judge Pisano ruled that Actavis' Abbreviated New Drug Application for a generic version of DepoMed's postherpetic neuralgia drug Gralise (gabapentin) infringes seven of the company's patents. The latest expiration of the patents involved in the case is February 2024.

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TheStreet Ratings team rates DEPOMED INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate DEPOMED INC (DEPO) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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 notable return on equity. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DEPO's very impressive revenue growth greatly exceeded the industry average of 4.5%. Since the same quarter one year prior, revenues leaped by 126.1%. 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. To add to this, DEPO has a quick ratio of 2.38, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for DEPOMED INC is currently very high, coming in at 93.81%. Regardless of DEPO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DEPO's net profit margin of 18.81% compares favorably to the industry average.
  • DEPOMED INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DEPOMED INC turned its bottom line around by earning $0.74 versus -$0.54 in the prior year. For the next year, the market is expecting a contraction of 37.8% in earnings ($0.46 versus $0.74).
  • You can view the full analysis from the report here: DEPO Ratings Report

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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.

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