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

  • ARWR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $67.4 million.
  • ARWR has traded 184,160 shares today.
  • ARWR is down 3.1% today.
  • ARWR was up 10% yesterday.

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More details on ARWR:

Arrowhead Research Corporation, a biopharmaceutical company, develops targeted RNAi therapeutics in the United States. Currently there are 4 analysts that rate Arrowhead Research a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Arrowhead Research has been 4.7 million shares per day over the past 30 days. Arrowhead Research has a market cap of $319.0 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 33.8% with 1.21 days to cover. Shares are down 44.4% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Arrowhead Research as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow and generally disappointing historical performance in the stock itself.

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 91.3% when compared to the same quarter one year ago, falling from -$6.08 million to -$11.63 million.
  • Net operating cash flow has significantly decreased to -$9.78 million or 83.27% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • In its most recent trading session, ARWR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 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, ARROWHEAD RESEARCH CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 44.2%. Since the same quarter one year prior, revenues slightly dropped by 2.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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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