InterMune (ITMN) Showing Signs Of Perilous Reversal Today

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

  • ITMN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $18.0 million.
  • ITMN has traded 145,104 shares today.
  • ITMN is down 3.2% today.
  • ITMN was up 7.9% yesterday.

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More details on ITMN:

InterMune, Inc., a biotechnology company, engages in the research, development, and commercialization of therapies in pulmonology and orphan fibrotic diseases. The company focuses on therapies for the treatment of idiopathic pulmonary fibrosis (IPF), a progressive and fatal lung disease. Currently there are 9 analysts that rate InterMune a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for InterMune has been 1.1 million shares per day over the past 30 days. InterMune has a market cap of $1.5 billion and is part of the health care sector and drugs industry. The stock has a beta of 4.67 and a short float of 14.9% with 10.44 days to cover. Shares are up 21.4% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates InterMune as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow and generally high debt management risk.

Highlights from the ratings report include:
  • 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 decreased by 22.0% when compared to the same quarter one year ago, dropping from -$40.92 million to -$49.92 million.
  • 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, INTERMUNE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to -$49.31 million or 14.72% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The debt-to-equity ratio is very high at 2.77 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 7.22, which shows the ability to cover short-term cash needs.
  • INTERMUNE INC's earnings per share improvement from the most recent quarter was slightly positive. 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, INTERMUNE INC reported poor results of -$2.84 versus -$2.70 in the prior year. This year, the market expects an improvement in earnings (-$2.69 versus -$2.84).

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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