Trade-Ideas: Mallinckrodt (MNK) Is Today's "Dead Cat Bounce" Stock

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

Trade-Ideas LLC identified

Mallinckrodt

(

MNK

) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Mallinckrodt as such a stock due to the following factors:

  • MNK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $291.8 million.
  • MNK has traded 238,830 shares today.
  • MNK is up 3.3% today.
  • MNK was down 6.5% yesterday.

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More details on MNK:

Mallinckrodt Public Limited Company develops, manufactures, markets, and distributes specialty pharmaceutical products and medical imaging agents worldwide. The company operates through two segments, Specialty Pharmaceuticals and Global Medical Imaging. Currently there are 9 analysts that rate Mallinckrodt a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Mallinckrodt has been 3.2 million shares per day over the past 30 days. Mallinckrodt has a market cap of $6.7 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.80 and a short float of 8.3% with 1.82 days to cover. Shares are down 46.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Mallinckrodt as a

hold

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

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 47.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 340.7% when compared to the same quarter one year prior, rising from -$24.10 million to $58.00 million.
  • MALLINCKRODT PLC reported significant earnings per share improvement 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, MALLINCKRODT PLC swung to a loss, reporting -$3.57 versus $0.06 in the prior year. This year, the market expects an improvement in earnings ($7.31 versus -$3.57).
  • The debt-to-equity ratio of 1.01 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, MNK's quick ratio is somewhat strong at 1.12, demonstrating the ability to handle short-term liquidity needs.
  • 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 Pharmaceuticals industry and the overall market, MALLINCKRODT PLC's return on equity significantly trails that of both the industry average and the S&P 500.

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