Barbarian At The Gate: Theravance (THRX)

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 Theravance ( THRX) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Theravance as such a stock due to the following factors:

  • THRX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $43.7 million.
  • THRX has traded 87,713 shares today.
  • THRX traded in a range 202.8% of the normal price range with a price range of $2.50.
  • THRX traded above its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on THRX:

Theravance, Inc., a biopharmaceutical company, engages in the discovery, development, and commercialization of small molecule medicines primarily for therapeutic areas of respiratory diseases, bacterial infections, and central nervous system (CNS)/pain. Currently there are 5 analysts that rate Theravance a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Theravance has been 914,100 shares per day over the past 30 days. Theravance has a market cap of $4.0 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.71 and a short float of 31.8% with 11.07 days to cover. Shares are up 1.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Theravance 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 feeble growth in its earnings per share.

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 significantly decreased by 35.4% when compared to the same quarter one year ago, falling from -$34.69 million to -$46.98 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, THERAVANCE 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 -$41.31 million or 49.86% 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.
  • THERAVANCE INC's earnings per share declined by 18.9% 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, THERAVANCE INC continued to lose money by earning -$0.19 versus -$1.41 in the prior year. For the next year, the market is expecting a contraction of 744.7% in earnings (-$1.61 versus -$0.19).
  • THRX, with its very weak revenue results, has greatly underperformed against the industry average of 11.1%. Since the same quarter one year prior, revenues plummeted by 69.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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