Today's Perilous Reversal Stock: NPS Pharmaceuticals (NPSP)

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 or Stephanie Link.

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

  • NPSP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $51.0 million.
  • NPSP has traded 417,823 shares today.
  • NPSP is down 4.4% today.
  • NPSP was up 5.4% yesterday.

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More details on NPSP:

NPS Pharmaceuticals, Inc., a biopharmaceutical company, engages in the development of therapeutic products in the United States. Its lead product is Gattex for the treatment of adult patients with short bowel syndrome (SBS) who are dependent on parenteral support. Currently there are 9 analysts that rate NPS Pharmaceuticals a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for NPS Pharmaceuticals has been 2.0 million shares per day over the past 30 days. NPS has a market cap of $2.8 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.42 and a short float of 10.7% with 4.58 days to cover. Shares are up 200% year to date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates NPS Pharmaceuticals as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, NPSP's share price has jumped by 234.49%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Net operating cash flow has significantly increased by 67.07% to -$8.84 million when compared to the same quarter last year. In addition, NPS PHARMACEUTICALS INC has also vastly surpassed the industry average cash flow growth rate of -64.29%.
  • Compared to other companies in the Biotechnology industry and the overall market, NPS PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Currently the debt-to-equity ratio of 1.92 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 6.05, which shows the ability to cover short-term cash needs.
  • 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 268.4% when compared to the same quarter one year ago, falling from $7.36 million to -$12.39 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.
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