Stock To Watch: Arrowhead Research (ARWR) In Perilous Reversal

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

  • ARWR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $55.5 million.
  • ARWR has traded 1.8 million shares today.
  • ARWR is down 3.6% today.
  • ARWR was up 11% yesterday.

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More details on ARWR:

Arrowhead Research Corporation, a biopharmaceutical company, develops targeted RNAi therapeutics in the United States. Currently there are 5 analysts that rate Arrowhead Research a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Arrowhead Research has been 2.4 million shares per day over the past 30 days. Arrowhead Research has a market cap of $674.9 million and is part of the health care sector and drugs industry. The stock has a beta of 2.95 and a short float of 10% with 1.76 days to cover. Shares are up 19.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Arrowhead Research as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and weak operating cash flow.

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 Biotechnology industry. The net income has significantly decreased by 106.3% when compared to the same quarter one year ago, falling from -$6.76 million to -$13.94 million.
  • Net operating cash flow has significantly decreased to -$7.70 million or 72.31% 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's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Biotechnology industry and the overall market, ARROWHEAD RESEARCH CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue growth greatly trails the industry average of 41.0%. Since the same quarter one year prior, revenues have remained constant. The stagnant revenue growth has not kept the company from increasing earnings per share.
  • ARWR's debt-to-equity ratio is very low at 0.01 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 15.32, which clearly demonstrates the ability to cover short-term cash needs.

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