DepoMed (DEPO) Showing Signs Of A Dead Cat Bounce Today

Trade-Ideas LLC identified DepoMed (DEPO) as a "dead cat bounce" (down big yesterday but up big today) candidate
By TheStreet Wire ,

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 $44.9 million.
  • DEPO has traded 72,869 shares today.
  • DEPO is up 4.2% today.
  • DEPO was down 6.2% yesterday.

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More details on DEPO:

Depomed, Inc., a specialty pharmaceutical company, develops products for pain and other central nervous system conditions in the United States. DEPO has a PE ratio of 31. Currently there are 4 analysts that rate DepoMed a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for DepoMed has been 1.7 million shares per day over the past 30 days. DepoMed has a market cap of $1.3 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.49 and a short float of 19.3% with 4.56 days to cover. Shares are up 23.5% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates DepoMed as a

hold

. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 7.1%. Since the same quarter one year prior, revenues rose by 39.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • 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 on the basis of return on equity, DEPOMED INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 269.9% when compared to the same quarter one year ago, falling from $12.75 million to -$21.65 million.

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