Ligand Pharmaceuticals Inc Stock Downgraded (LGND)

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.

NEW YORK ( TheStreet) -- Ligand Pharmaceuticals (Nasdaq: LGND) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

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Highlights from the ratings report include:
  • The revenue growth significantly trails the industry average of 43.6%. Since the same quarter one year prior, revenues rose by 10.7%. 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.
  • LGND's debt-to-equity ratio is very low at 0.04 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.39, which illustrates the ability to avoid short-term cash problems.
  • LIGAND PHARMACEUTICAL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, LIGAND PHARMACEUTICAL INC turned its bottom line around by earning $0.42 versus -$0.14 in the prior year. This year, the market expects an improvement in earnings ($1.55 versus $0.42).
  • 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 73.9% when compared to the same quarter one year ago, falling from $6.09 million to $1.59 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Biotechnology industry and the overall market, LIGAND PHARMACEUTICAL INC's return on equity is below that of both the industry average and the S&P 500.
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