NEW YORK (TheStreet) -- Shares of Vivus Inc. (VVUS) are down 7.12% to $5.74 after Piper Jaffray downgraded the stock earlier today to "underweight" from "neutral."
The firm cut its price target to $3 from from $8.
While commenting positively on the outlook for the U.S. anti-obesity drug market and positive evidence, Piper Jaffray said for
long-term pharmacoeconomic benefit from treating obesity, these macro-dynamics have not yet appreciably translated to significant gains into Qsymia's prescription and sales trends, in our view ... Given that now nearly three full quarters have transpired post proxy battle and management changes, we have grown increasingly wary on the outlook for Qsymia.
The firm concluded that, "based on our updated view of increased execution risk, we are reducing our out-year Qsymia revenue projections and also increasing our discount rate to 20% (from 15%)."
TheStreet Ratings team rates VIVUS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate VIVUS INC (VVUS) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, generally disappointing historical performance in the stock itself and generally high debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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, VIVUS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The debt-to-equity ratio of 1.39 is relatively high when compared with the industry average, suggesting a need for better debt level management. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 6.94, which shows the ability to cover short-term cash needs.
- VVUS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 44.35%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- VIVUS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, VIVUS INC reported poor results of -$1.73 versus -$1.40 in the prior year. This year, the market expects an improvement in earnings (-$1.67 versus -$1.73).
- The gross profit margin for VIVUS INC is currently very high, coming in at 93.50%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -38.95% is in-line with the industry average.
- You can view the full analysis from the report here: VVUS Ratings Report