No Snake Oil in These Four Pharmaceutical Stocks

These pharmaceutical companies have what I consider to be the strongest technical profiles.
By Bruce Kamich ,

NEW YORK (TheStreet) -- While sifting through the charts of some 25 top pharmaceutical firms, I culled out four candidates with what I consider to be the strongest technical profiles. Here are our top A to Z picks.

Alkermes (ALKS) - Get Report  has been locked in a $20 sideways trading range, chart above, bounded by $55 and $75. Beneath the surface, the On-Balance-Volume (OBV) line has tracked the price action with an upward bias. The 50-day and 200-day moving averages are in a bullish alignment, as the 50-day average moves above the 200-day while both are rising. An upside breakout is expected soon.

Shares of Bristol-Myers Squibb (BMY), chart above, show a similar bullish setup. Notice the upward movement in the OBV line since early June. Strength above $70 should generate a breakout.

While Mylan (MYL) cannot claim to be on the verge of a breakout from a sideways range, it can boast a nice base pattern in the chart above. Over the past three months, MYL has gone from a downtrend to a sideways trend and now a fledgling uptrend. Prices are above the 50-day moving average. The On-Balance-Volume line has turned up nicely and this is all preceded by a bullish divergence during August, September and October.

Though Zoetis (ZTS) may be at the back of the class, it is a turnaround in progress. Prices of ZTS are above the 50-day average and could rally above the 200-day moving average. The OBV line is improving and there is a bullish divergence in August and September. A better test of the $50 area is probably in the cards.

TheStreet Ratings team rates ALKERMES PLC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

We rate ALKERMES PLC (ALKS) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and weak operating cash flow.

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

  • ALKERMES PLC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, ALKERMES PLC swung to a loss, reporting -$0.22 versus $0.13 in the prior year. For the next year, the market is expecting a contraction of 77.3% in earnings (-$0.39 versus -$0.22).
  • 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 Biotechnology industry. The net income has significantly decreased by 102.8% when compared to the same quarter one year ago, falling from -$39.96 million to -$81.02 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Biotechnology industry and the overall market, ALKERMES PLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$29.45 million or 277.07% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • ALKS, with its decline in revenue, underperformed when compared the industry average of 13.4%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: ALKS

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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