Perilous Reversal Stock: Orexigen Therapeutics (OREX)

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

  • OREX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $15.5 million.
  • OREX has traded 15.3 million shares today.
  • OREX is down 3.4% today.
  • OREX was up 9.3% yesterday.

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More details on OREX:

Orexigen Therapeutics, Inc., a biopharmaceutical company, focuses on the development of pharmaceutical product candidates for the treatment of obesity. Currently there are 6 analysts that rate Orexigen Therapeutics a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Orexigen Therapeutics has been 1.1 million shares per day over the past 30 days. Orexigen has a market cap of $581.9 million and is part of the health care sector and drugs industry. The stock has a beta of 2.28 and a short float of 8.2% with 2.71 days to cover. Shares are up 9.3% year to date as of the close of trading on Friday.

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

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Orexigen Therapeutics as a sell. Among the areas we feel are negative, one of the most important has been an overall disappointing return on equity.

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 Biotechnology industry and the overall market, OREXIGEN THERAPEUTICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Along with the stagnant revenue growth, the company underperformed against the industry average of 10.9%. Since the same quarter one year prior, revenues have remained constant. The stagnant revenue growth has not kept the company from increasing earnings per share.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. 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.
  • OREXIGEN THERAPEUTICS 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, OREXIGEN THERAPEUTICS INC reported poor results of -$1.26 versus -$0.59 in the prior year. This year, the market expects an improvement in earnings (-$0.78 versus -$1.26).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Biotechnology industry. The net income increased by 39.2% when compared to the same quarter one year prior, rising from -$30.56 million to -$18.57 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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