Trade-Ideas LLC identified

Zogenix

(

ZGNX

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

  • ZGNX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.2 million.
  • ZGNX has traded 163,727 shares today.
  • ZGNX is trading at 10.09 times the normal volume for the stock at this time of day.
  • ZGNX is trading at a new low 6.17% 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 ZGNX:

Zogenix, Inc., a pharmaceutical company, develops and commercializes therapies for the treatment of central nervous system disorders in the United States. Its marketed product includes Zohydro ER, an extended-release formulation of hydrocodone for the treatment of severe chronic pain. Currently there are 4 analysts that rate Zogenix a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Zogenix has been 325,100 shares per day over the past 30 days. Zogenix has a market cap of $246.4 million and is part of the health care sector and drugs industry. The stock has a beta of 1.42 and a short float of 20.6% with 10.69 days to cover. Shares are down 37.5% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Zogenix as a

sell

. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • 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, ZOGENIX INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ZOGENIX INC is rather low; currently it is at 18.66%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, ZGNX's net profit margin of -145.40% significantly underperformed when compared to the industry average.
  • ZGNX's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 31.07%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • ZOGENIX INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ZOGENIX INC swung to a loss, reporting -$1.93 versus $2.56 in the prior year. For the next year, the market is expecting a contraction of 32.6% in earnings (-$2.56 versus -$1.93).
  • ZGNX, with its very weak revenue results, has greatly underperformed against the industry average of 2.7%. Since the same quarter one year prior, revenues plummeted by 59.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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