Trade-Ideas LLC identified

Vertex Pharmaceuticals

(

VRTX

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

  • VRTX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $221.6 million.
  • VRTX has traded 2.4 million shares today.
  • VRTX is down 3.3% today.
  • VRTX was up 5.4% yesterday.

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More details on VRTX:

Vertex Pharmaceuticals Incorporated engages in discovering, developing, manufacturing, and commercializing small molecule drugs for patients with serious diseases in specialty markets. Currently there are 8 analysts that rate Vertex Pharmaceuticals a buy, no analysts rate it a sell, and 8 rate it a hold.

TST Recommends

The average volume for Vertex Pharmaceuticals has been 2.0 million shares per day over the past 30 days. Vertex has a market cap of $28.1 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.42 and a short float of 3% with 3.41 days to cover. Shares are up 1.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Vertex Pharmaceuticals as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity 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 underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Biotechnology industry average. The net income has decreased by 18.5% when compared to the same quarter one year ago, dropping from -$159.38 million to -$188.85 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, VERTEX PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • VERTEX PHARMACEUTICALS INC's earnings per share declined by 14.7% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, VERTEX PHARMACEUTICALS INC reported poor results of -$3.14 versus -$2.29 in the prior year. This year, the market expects an improvement in earnings (-$1.36 versus -$3.14).
  • After a year of stock price fluctuations, the net result is that VRTX's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • Net operating cash flow has increased to -$95.21 million or 25.56% when compared to the same quarter last year. In addition, VERTEX PHARMACEUTICALS INC has also modestly surpassed the industry average cash flow growth rate of 17.19%.

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