Perilous Reversal Watch: NewLink Genetics (NLNK)

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

  • NLNK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $17.5 million.
  • NLNK has traded 156,312 shares today.
  • NLNK is down 3.2% today.
  • NLNK was up 8.3% yesterday.

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More details on NLNK:

NewLink Genetics Corporation, a biopharmaceutical company, through its subsidiary, BioProtection Systems Corporation, focuses on discovering, developing, and commercializing immunotherapeutic products to enhance cancer treatment options for patients and physicians. Currently there are 4 analysts that rate NewLink Genetics a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for NewLink Genetics has been 361,200 shares per day over the past 30 days. NewLink has a market cap of $994.3 million and is part of the health care sector and drugs industry. The stock has a beta of -1.54 and a short float of 19.4% with 7.57 days to cover. Shares are up 75.7% year-to-date as of the close of trading on Monday.

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

TheStreet Quant Ratings rates NewLink Genetics 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 and weak operating cash flow.

Highlights from the ratings report include:
  • NEWLINK GENETICS CORP's earnings per share declined by 14.3% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, NEWLINK GENETICS CORP reported poor results of -$1.12 versus -$0.87 in the prior year. For the next year, the market is expecting a contraction of 15.6% in earnings (-$1.30 versus -$1.12).
  • 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 38.8% when compared to the same quarter one year ago, falling from -$5.85 million to -$8.12 million.
  • Net operating cash flow has significantly decreased to -$6.28 million or 86.81% 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 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, NEWLINK GENETICS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 12.7%. Since the same quarter one year prior, revenues fell by 19.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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