Stock To Watch: Horizon Pharma (HZNP) In Perilous Reversal

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

  • HZNP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $13.9 million.
  • HZNP has traded 248,800 shares today.
  • HZNP is down 3.5% today.
  • HZNP was up 35.6% yesterday.

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More details on HZNP:

Horizon Pharma, Inc., a specialty pharmaceutical company, through its subsidiaries, develops and commercializes medicines for the treatment of arthritis, pain, and inflammatory diseases. Currently there are 3 analysts that rate Horizon Pharma a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Horizon Pharma has been 821,900 shares per day over the past 30 days. Horizon has a market cap of $294.4 million and is part of the health care sector and drugs industry. The stock has a beta of 2.21 and a short float of 12.3% with 2.32 days to cover. Shares are up 91.8% year to date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Horizon Pharma as a sell. The area that we feel has been the company's primary weakness has been its disappointing return on equity.

Highlights from the ratings report include:
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market, HORIZON PHARMA INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has exceeded that of the Pharmaceuticals industry average, but is less than that of the S&P 500. The net income increased by 19.1% when compared to the same quarter one year prior, going from -$22.78 million to -$18.44 million.
  • The gross profit margin for HORIZON PHARMA INC is currently very high, coming in at 87.13%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -150.48% is in-line with the industry average.
  • Net operating cash flow has increased to -$10.90 million or 31.26% when compared to the same quarter last year. In addition, HORIZON PHARMA INC has also modestly surpassed the industry average cash flow growth rate of 29.89%.
  • The debt-to-equity ratio is somewhat low, currently at 0.68, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, HZNP has a quick ratio of 1.78, which demonstrates the ability of the company to cover short-term liquidity needs.

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