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

  • ARIA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $209.5 million.
  • ARIA has traded 837,752 shares today.
  • ARIA is down 3.8% today.
  • ARIA was up 11.4% yesterday.

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More details on ARIA:

ARIAD Pharmaceuticals, Inc., an oncology company, focuses on the discovery, development, and commercialization of medicines for cancer patients. Currently there are 4 analysts that rate Ariad Pharmaceuticals a buy, 2 analysts rate it a sell, and 7 rate it a hold.

The average volume for Ariad Pharmaceuticals has been 30.1 million shares per day over the past 30 days. Ariad has a market cap of $1.3 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.09 and a short float of 24.1% with 1.58 days to cover. Shares are up 5.1% year-to-date as of the close of trading on Thursday.

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 Ariad Pharmaceuticals as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • ARIAD PHARMACEUTICALS INC's earnings per share declined by 12.5% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, ARIAD PHARMACEUTICALS INC reported poor results of -$1.34 versus -$0.93 in the prior year. For the next year, the market is expecting a contraction of 16.5% in earnings (-$1.56 versus -$1.34).
  • 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 24.7% when compared to the same quarter one year ago, dropping from -$53.21 million to -$66.34 million.
  • Looking at the price performance of ARIA's shares over the past 12 months, there is not much good news to report: the stock is down 64.72%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Net operating cash flow has decreased to -$56.17 million or 26.41% when compared to the same quarter last year. Despite a decrease in cash flow ARIAD PHARMACEUTICALS INC is still fairing well by exceeding its industry average cash flow growth rate of -38.82%.
  • 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 Biotechnology industry and the overall market, ARIAD PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.

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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