Roof Leaker To Watch: Biomarin Pharmaceutical (BMRN)

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 Biomarin Pharmaceutical ( BMRN) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Biomarin Pharmaceutical as such a stock due to the following factors:

  • BMRN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $60.0 million.
  • BMRN has traded 278,823 shares today.
  • BMRN is trading at 1.52 times the normal volume for the stock at this time of day.
  • BMRN crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on BMRN:

BioMarin Pharmaceutical Inc. develops and commercializes biopharmaceuticals for serious diseases and medical conditions in the United States, Europe, Latin America, and internationally. Currently there are 10 analysts that rate Biomarin Pharmaceutical a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Biomarin Pharmaceutical has been 1.1 million shares per day over the past 30 days. Biomarin has a market cap of $10.4 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.65 and a short float of 4.5% with 6.21 days to cover. Shares are down 2.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Biomarin Pharmaceutical as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 43.4%. Since the same quarter one year prior, revenues rose by 40.2%. 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.
  • Despite currently having a low debt-to-equity ratio of 0.45, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 5.75 is very high and demonstrates very strong liquidity.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Biotechnology industry and the overall market, BIOMARIN PHARMACEUTICAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$11.53 million or 69.16% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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