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

Cubist Pharmaceuticals

(

CBST

) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Cubist Pharmaceuticals as such a stock due to the following factors:

  • CBST has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $80.7 million.
  • CBST has traded 518,548 shares today.
  • CBST is down 3.1% today.
  • CBST was up 8% yesterday.

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More details on CBST:

Cubist Pharmaceuticals, Inc., a biopharmaceutical company, focuses on the research, development, and commercialization of pharmaceutical products for various medical needs in the acute care environment in the United States. CBST has a PE ratio of 204.7. Currently there are 10 analysts that rate Cubist Pharmaceuticals a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Cubist Pharmaceuticals has been 1.3 million shares per day over the past 30 days. Cubist has a market cap of $4.9 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.78 and a short float of 8.5% with 3.53 days to cover. Shares are up 55.8% year to date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Cubist Pharmaceuticals as a

hold

. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • CBST's revenue growth has slightly outpaced the industry average of 10.9%. Since the same quarter one year prior, revenues rose by 11.7%. 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.
  • The gross profit margin for CUBIST PHARMACEUTICALS INC is currently very high, coming in at 80.74%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -12.74% is in-line with the industry average.
  • Despite currently having a low debt-to-equity ratio of 0.59, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 4.95 is very high and demonstrates very strong liquidity.
  • 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, CUBIST PHARMACEUTICALS INC'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 -$58.22 million or 224.88% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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