Arena Pharmaceuticals (ARNA) Flagged As Strong On High Volume

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 Arena Pharmaceuticals ( ARNA) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Arena Pharmaceuticals as such a stock due to the following factors:

  • ARNA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $19.9 million.
  • ARNA has traded 960,488 shares today.
  • ARNA is trading at 4.81 times the normal volume for the stock at this time of day.
  • ARNA is trading at a new high 3.02% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 ARNA:

Arena Pharmaceuticals, Inc., a biopharmaceutical company, discovers, develops, and commercializes novel drugs that target G protein-coupled receptors. The company offers BELVIQ, a drug used to treat chronic weight management in adults. Currently there are 3 analysts that rate Arena Pharmaceuticals a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Arena Pharmaceuticals has been 4.9 million shares per day over the past 30 days. Arena has a market cap of $859.6 million and is part of the health care sector and drugs industry. The stock has a beta of -3.09 and a short float of 23.3% with 8.43 days to cover. Shares are down 33% year-to-date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Arena Pharmaceuticals as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

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 81.3% when compared to the same quarter one year ago, falling from $40.10 million to $7.48 million.
  • 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, ARENA PHARMACEUTICALS 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 -$33.92 million or 177.60% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.87%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 83.33% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • ARENA PHARMACEUTICALS 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARENA PHARMACEUTICALS INC continued to lose money by earning -$0.10 versus -$0.47 in the prior year. For the next year, the market is expecting a contraction of 225.0% in earnings (-$0.33 versus -$0.10).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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