Today's Dead Cat Bounce Stock Is Horizon Pharma (HZNP)

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 Horizon Pharma ( HZNP) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Horizon Pharma as such a stock due to the following factors:

  • HZNP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $18.4 million.
  • HZNP has traded 88,166 shares today.
  • HZNP is up 6.4% today.
  • HZNP was down 5.5% yesterday.

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More details on HZNP:

Horizon Pharma plc, a specialty pharmaceutical company, through its subsidiaries, develops and commercializes medicines for the treatment of arthritis, pain, and inflammatory diseases. Currently there are 4 analysts that rate Horizon Pharma a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Horizon Pharma has been 1.6 million shares per day over the past 30 days. Horizon has a market cap of $968.3 million and is part of the health care sector and drugs industry. The stock has a beta of 2.90 and a short float of 31.2% with 14.44 days to cover. Shares are up 71.7% 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 Horizon Pharma as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk and disappointing return on equity.

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 Pharmaceuticals industry. The net income has significantly decreased by 50.6% when compared to the same quarter one year ago, falling from -$18.44 million to -$27.77 million.
  • The debt-to-equity ratio of 1.42 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, HZNP maintains a poor quick ratio of 0.89, which illustrates the inability to avoid short-term cash problems.
  • 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 Pharmaceuticals industry and the overall market, HORIZON PHARMA PLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for HORIZON PHARMA PLC is currently very high, coming in at 90.40%. Regardless of HZNP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HZNP's net profit margin of -42.03% significantly underperformed when compared to the industry average.
  • HORIZON PHARMA PLC's earnings per share declined by 31.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HORIZON PHARMA PLC continued to lose money by earning -$2.29 versus -$2.53 in the prior year. This year, the market expects an improvement in earnings ($0.70 versus -$2.29).

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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