Roof Leaker To Watch: Regeneron Pharmaceuticals (REGN)

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 Regeneron Pharmaceuticals ( REGN) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Regeneron Pharmaceuticals as such a stock due to the following factors:

  • REGN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $157.1 million.
  • REGN has traded 691,954 shares today.
  • REGN is trading at 1.58 times the normal volume for the stock at this time of day.
  • REGN crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on REGN:

Regeneron Pharmaceuticals, Inc., a biopharmaceutical company, discovers, invents, develops, manufactures, and commercializes medicines for the treatment of serious medical conditions in the United States and internationally. REGN has a PE ratio of 86.7. Currently there are 6 analysts that rate Regeneron Pharmaceuticals a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Regeneron Pharmaceuticals has been 869,600 shares per day over the past 30 days. Regeneron has a market cap of $29.9 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.86 and a short float of 6.1% with 8.76 days to cover. Shares are up 10.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Regeneron Pharmaceuticals as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, poor profit margins and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 25.1%. Since the same quarter one year prior, revenues rose by 42.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • REGN's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 5.56, which clearly demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has decreased to $53.53 million or 37.93% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 33.8% when compared to the same quarter one year ago, falling from $98.87 million to $65.44 million.

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