NEW YORK (TheStreet) -- Foundation Medicine (FMI) - Get Foundation Medicine, Inc. Report shares are down slightly, 1.9% to $45.85 in early market trading, one session after the company more than doubled it's stock price in trading following the announcement of a merger agreement with Roche Holding AG (RHHBY) .
However, analysts at JMP Securities reiterated their "market perform" rating and raised their price target on the company to $67 from $45 suggesting a potential 46.1% upside from the stock's current price.
Exclusive Report:Jim Cramer's Best Stocks for 2015
The firm met with the company's management yesterday after the announcement where it learned that the cash infusion from the deal would accelerate the development of of a circulating tumor DNA test to late 2015 from early 2016.
Additionally, the firm discovered that "Despite investor concerns, management noted that the company's existing pharma partnerships have voiced a high degree of praise and support for the Roche relationship. While the information unique to each partner is proprietary, Foundation Medicine often improves upon its pharma offerings as the company learns from its customers' needs."
"Thus, FMI's pharma offerings are likely to get better, faster. 2016 revenue estimates likely leave room for upside potential, given that international revenue and circulating DNA testing revenue is not in our estimates," analysts said.
TheStreet Ratings team rates FOUNDATION MEDICINE INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate FOUNDATION MEDICINE INC (FMI) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 4.1% when compared to the same quarter one year ago, dropping from -$12.46 million to -$12.98 million.
- FOUNDATION MEDICINE INC reported flat earnings per share in the most recent quarter. For the next year, the market is expecting a contraction of 100.0% in earnings (-$1.88 versus -$0.94).
- The gross profit margin for FOUNDATION MEDICINE INC is rather high; currently it is at 67.27%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, FMI's net profit margin of -78.91% significantly underperformed when compared to the industry average.
- 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.
- FMI has underperformed the S&P 500 Index, declining 6.17% from its price level of one year ago.
- You can view the full analysis from the report here: FMI Ratings Report