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

Intercept Pharmaceuticals

(

ICPT

) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Intercept Pharmaceuticals as such a stock due to the following factors:

  • ICPT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $221.4 million.
  • ICPT has traded 666,492 shares today.
  • ICPT traded in a range 228.7% of the normal price range with a price range of $35.90.
  • ICPT traded above its daily resistance level (quality: 5 days, meaning that the stock is crossing a resistance level set by the last 5 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on ICPT:

Intercept Pharmaceuticals, Inc., a development stage biopharmaceutical company, focuses on the discovery, development, and commercialization of novel therapeutics to treat chronic liver and intestinal diseases utilizing its proprietary bile acid chemistry. Currently there are 8 analysts that rate Intercept Pharmaceuticals a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Intercept Pharmaceuticals has been 610,700 shares per day over the past 30 days. Intercept has a market cap of $6.1 billion and is part of the health care sector and drugs industry. The stock has a beta of -9.44 and a short float of 27.8% with 3.62 days to cover. Shares are up 67.1% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Intercept Pharmaceuticals as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • 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 181.6% when compared to the same quarter one year ago, falling from -$12.37 million to -$34.82 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 Biotechnology industry and the overall market, INTERCEPT PHARMA 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 -$32.14 million or 208.32% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 34.28%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 154.68% 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.
  • INTERCEPT PHARMA INC 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, INTERCEPT PHARMA INC reported poor results of -$14.42 versus -$3.70 in the prior year. This year, the market expects an improvement in earnings (-$8.57 versus -$14.42).

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