ARIAD Pharmaceuticals (ARIA) Showing Signs Of Perilous Reversal Today

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 $67.6 million.
  • ARIA has traded 437,907 shares today.
  • ARIA is down 3.3% today.
  • ARIA was up 5.2% yesterday.

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More details on ARIA:

ARIAD Pharmaceuticals, Inc., an oncology company, is engaged in the discovery, development, and commercialization of medicines for cancer patients. Currently there are 5 analysts that rate ARIAD Pharmaceuticals a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for ARIAD Pharmaceuticals has been 8.1 million shares per day over the past 30 days. ARIAD has a market cap of $1.0 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.41 and a short float of 23.9% with 4.25 days to cover. Shares are down 13.8% year-to-date as of the close of trading on Wednesday.

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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 disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • 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 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.
  • ARIA'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 74.00%, 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.
  • ARIAD PHARMACEUTICALS INC has improved earnings per share by 25.0% 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, ARIAD PHARMACEUTICALS INC reported poor results of -$1.49 versus -$1.34 in the prior year. This year, the market expects an improvement in earnings (-$1.05 versus -$1.49).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Biotechnology industry average. The net income increased by 22.9% when compared to the same quarter one year prior, going from -$64.67 million to -$49.82 million.
  • Net operating cash flow has increased to -$52.41 million or 23.43% when compared to the same quarter last year. In addition, ARIAD PHARMACEUTICALS INC has also modestly surpassed the industry average cash flow growth rate of 17.67%.

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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