Barbarian At The Gate: Jazz Pharmaceuticals (JAZZ)

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 Jazz Pharmaceuticals ( JAZZ) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Jazz Pharmaceuticals as such a stock due to the following factors:

  • JAZZ has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $104.2 million.
  • JAZZ has traded 614,620 shares today.
  • JAZZ traded in a range 222.6% of the normal price range with a price range of $10.53.
  • JAZZ traded above its daily resistance level (quality: 11 days, meaning that the stock is crossing a resistance level set by the last 11 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on JAZZ:

Jazz Pharmaceuticals Public Limited Company, a specialty biopharmaceutical company, identifies, develops, and commercializes pharmaceutical products for various medical needs in the United States, Europe, and internationally. JAZZ has a PE ratio of 113.0. Currently there are 8 analysts that rate Jazz Pharmaceuticals a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Jazz Pharmaceuticals has been 791,700 shares per day over the past 30 days. Jazz has a market cap of $8.2 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.38 and a short float of 2.9% with 2.55 days to cover. Shares are up 8.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Jazz Pharmaceuticals as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 5.4%. Since the same quarter one year prior, revenues rose by 25.8%. 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.
  • Net operating cash flow has slightly increased to $68.72 million or 4.29% when compared to the same quarter last year. In addition, JAZZ PHARMACEUTICALS PLC has also vastly surpassed the industry average cash flow growth rate of -66.20%.
  • JAZZ's debt-to-equity ratio of 0.96 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that JAZZ's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.71 is high and demonstrates strong liquidity.
  • 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 313.4% when compared to the same quarter one year ago, falling from $43.43 million to -$92.65 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. When compared to other companies in the Pharmaceuticals industry and the overall market, JAZZ PHARMACEUTICALS PLC's return on equity is below that of both the industry average and the S&P 500.

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