Merrimack Pharmaceuticals (MACK) Is Today's Perilous Reversal Stock

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

  • MACK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $16.8 million.
  • MACK has traded 156,755 shares today.
  • MACK is down 3% today.
  • MACK was up 5.8% yesterday.

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More details on MACK:

Merrimack Pharmaceuticals, Inc., a biopharmaceutical company, is engaged in discovering, developing, and preparing to commercialize medicines paired with companion diagnostics for the treatment of cancer primarily in the United States. Currently there are 3 analysts that rate Merrimack Pharmaceuticals a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Merrimack Pharmaceuticals has been 2.2 million shares per day over the past 30 days. Merrimack has a market cap of $969.9 million and is part of the health care sector and drugs industry. The stock has a beta of 1.20 and a short float of 23.5% with 10.24 days to cover. Shares are up 65.5% year-to-date as of the close of trading on Monday.

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 Merrimack Pharmaceuticals as a sell. The area that we feel has been the company's primary weakness has been its unimpressive growth in net income.

Highlights from the ratings report include:
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Biotechnology industry average, but is greater than that of the S&P 500. The net income increased by 29.6% when compared to the same quarter one year prior, rising from -$39.63 million to -$27.90 million.
  • MERRIMACK PHARMACEUTICALS has improved earnings per share by 30.8% 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, MERRIMACK PHARMACEUTICALS reported poor results of -$1.32 versus -$0.98 in the prior year. This year, the market expects an improvement in earnings (-$0.87 versus -$1.32).
  • This stock has increased by 178.85% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in MACK do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • Net operating cash flow has significantly increased by 373.73% to $61.10 million when compared to the same quarter last year. In addition, MERRIMACK PHARMACEUTICALS has also vastly surpassed the industry average cash flow growth rate of 117.89%.
  • MACK's very impressive revenue growth greatly exceeded the industry average of 40.4%. Since the same quarter one year prior, revenues leaped by 308.4%. Growth in the company's revenue appears to have helped boost the 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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