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

  • ANAC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $14.8 million.
  • ANAC has traded 187,809 shares today.
  • ANAC is down 3.2% today.
  • ANAC was up 5.5% yesterday.

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More details on ANAC:

Anacor Pharmaceuticals, Inc., a biopharmaceutical company, focuses on discovering, developing, and commercializing novel small-molecule therapeutics derived from its boron chemistry platform. ANAC has a PE ratio of 13.5. Currently there are 3 analysts that rate Anacor Pharmaceuticals a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Anacor Pharmaceuticals has been 548,000 shares per day over the past 30 days. Anacor has a market cap of $1.0 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.30 and a short float of 11.1% with 10.67 days to cover. Shares are up 51.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Anacor Pharmaceuticals as a hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The current debt-to-equity ratio, 0.32, is low and is below the industry average, implying that there has been successful management of debt levels. Along with this, the company maintains a quick ratio of 5.63, which clearly demonstrates the ability to cover short-term cash needs.
  • 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, ANACOR PHARMACEUTICALS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 43.5%. Since the same quarter one year prior, revenues fell by 14.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 -$14.10 million to -$24.51 million.
  • Net operating cash flow has decreased to -$16.02 million or 33.68% 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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