Perilous Reversal Stock: Zogenix (ZGNX)

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

  • ZGNX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $18.4 million.
  • ZGNX has traded 575,013 shares today.
  • ZGNX is down 13.5% today.
  • ZGNX was up 11.8% yesterday.

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More details on ZGNX:

Zogenix, Inc., a pharmaceutical company, engages in the development and commercialization of products for the treatment of central nervous system disorders and pain. Currently there are 4 analysts that rate Zogenix a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Zogenix has been 2.7 million shares per day over the past 30 days. Zogenix has a market cap of $531.7 million and is part of the health care sector and drugs industry. The stock has a beta of 1.85 and a short float of 25.9% with 2.25 days to cover. Shares are up 28.2% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Zogenix as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally high debt management risk 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 Pharmaceuticals industry. The net income has significantly decreased by 5439.0% when compared to the same quarter one year ago, falling from -$0.64 million to -$35.62 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 Pharmaceuticals industry and the overall market, ZOGENIX INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ZOGENIX INC is currently lower than what is desirable, coming in at 25.03%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -358.99% is significantly below that of the industry average.
  • Currently the debt-to-equity ratio of 1.56 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, ZGNX's quick ratio is somewhat strong at 1.34, demonstrating the ability to handle short-term liquidity needs.
  • ZOGENIX INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ZOGENIX INC reported poor results of -$0.72 versus -$0.64 in the prior year. This year, the market expects an improvement in earnings (-$0.58 versus -$0.72).

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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