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.

Trade-Ideas LLC identified

Foundation Medicine

(

FMI

) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Foundation Medicine as such a stock due to the following factors:

  • FMI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $4.5 million.
  • FMI has traded 174,685 shares today.
  • FMI is trading at 20.40 times the normal volume for the stock at this time of day.
  • FMI is trading at a new low 19.04% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on FMI:

Foundation Medicine, Inc. provides various molecular information products in the United States. Currently there are 2 analysts that rate Foundation Medicine a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Foundation Medicine has been 245,100 shares per day over the past 30 days. Foundation Medicine has a market cap of $1.0 billion and is part of the health care sector and health services industry. Shares are up 31.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Foundation Medicine as a

sell

. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share and deteriorating net income.

Highlights from the ratings report include:

  • FOUNDATION MEDICINE INC's earnings per share declined by 34.1% in the most recent quarter compared to 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, FOUNDATION MEDICINE INC reported poor results of -$1.86 versus -$0.94 in the prior year. For the next year, the market is expecting a contraction of 20.4% in earnings (-$2.24 versus -$1.86).
  • 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 39.4% when compared to the same quarter one year ago, falling from -$12.17 million to -$16.97 million.
  • The gross profit margin for FOUNDATION MEDICINE INC is rather high; currently it is at 65.22%. Regardless of FMI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FMI's net profit margin of -87.92% significantly underperformed when compared to the industry average.
  • Net operating cash flow has increased to -$10.92 million or 18.77% when compared to the same quarter last year. Despite an increase in cash flow of 18.77%, FOUNDATION MEDICINE INC is still growing at a significantly lower rate than the industry average of 133.59%.
  • Compared to other companies in the Biotechnology industry and the overall market, FOUNDATION MEDICINE INC's return on equity significantly trails that of both the industry average and the S&P 500.

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