Ironwood Pharmaceuticals (IRWD) Is Weak On High Volume 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 Ironwood Pharmaceuticals ( IRWD) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Ironwood Pharmaceuticals as such a stock due to the following factors:

  • IRWD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $8.1 million.
  • IRWD has traded 224,802 shares today.
  • IRWD is trading at 4.39 times the normal volume for the stock at this time of day.
  • IRWD is trading at a new low 6.16% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on IRWD:

Ironwood Pharmaceuticals, Inc., an entrepreneurial pharmaceutical company, discovers, develops, and commercializes human therapeutic products. Currently there are 5 analysts that rate Ironwood Pharmaceuticals a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Ironwood Pharmaceuticals has been 1.2 million shares per day over the past 30 days. Ironwood has a market cap of $1.6 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.97 and a short float of 17.3% with 21.33 days to cover. Shares are up 11.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Ironwood Pharmaceuticals as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally high debt management risk.

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, IRONWOOD PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio of 1.26 is relatively high when compared with the industry average, suggesting a need for better debt level management. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 7.36, which shows the ability to cover short-term cash needs.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Biotechnology industry average, but is greater than that of the S&P 500. The net income increased by 7.3% when compared to the same quarter one year prior, going from -$65.15 million to -$60.36 million.
  • The revenue fell significantly faster than the industry average of 43.4%. Since the same quarter one year prior, revenues fell by 29.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The stock price has risen over the past year, but it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.

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