Trade-Ideas LLC identified

Cempra

(

CEMP

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

  • CEMP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $22.6 million.
  • CEMP has traded 1.2 million shares today.
  • CEMP is down 3.4% today.
  • CEMP was up 6.3% yesterday.

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More details on CEMP:

Cempra, Inc., a clinical-stage pharmaceutical company, focuses on developing antibiotics to meet medical needs in the treatment of bacterial infectious diseases in North America. Currently there are 10 analysts that rate Cempra a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Cempra has been 722,300 shares per day over the past 30 days. Cempra has a market cap of $851.7 million and is part of the health care sector and drugs industry. The stock has a beta of 1.51 and a short float of 24.6% with 8.85 days to cover. Shares are down 42.3% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Cempra as a

sell

. 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 generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • CEMPRA INC's earnings per share declined by 48.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, CEMPRA INC reported poor results of -$2.09 versus -$1.80 in the prior year. For the next year, the market is expecting a contraction of 37.3% in earnings (-$2.87 versus -$2.09).
  • 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 68.8% when compared to the same quarter one year ago, falling from -$17.42 million to -$29.41 million.
  • 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, CEMPRA INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 61.03%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 48.78% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • CEMP, with its very weak revenue results, has greatly underperformed against the industry average of 12.6%. Since the same quarter one year prior, revenues plummeted by 80.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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