Trade-Ideas: Cempra (CEMP) Is Today's Strong On High Relative Volume 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.

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

  • CEMP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $35.5 million.
  • CEMP has traded 178,068 shares today.
  • CEMP is trading at 2.99 times the normal volume for the stock at this time of day.
  • CEMP is trading at a new high 6.07% 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 CEMP:

Cempra, Inc., a clinical-stage pharmaceutical company, focuses on developing antibiotics to meet medical needs in the treatment of bacterial infectious diseases in North America. Currently there are 8 analysts that rate Cempra a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Cempra has been 987,600 shares per day over the past 30 days. Cempra has a market cap of $1.5 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.76 and a short float of 8.5% with 2.89 days to cover. Shares are up 43.6% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cempra as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income 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 compared to the Pharmaceuticals industry average, but is greater than that of the S&P 500. The net income has decreased by 0.4% when compared to the same quarter one year ago, dropping from -$16.83 million to -$16.90 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 Pharmaceuticals industry and the overall market, CEMPRA INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • CEMPRA INC has improved earnings per share by 9.8% 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, CEMPRA INC reported poor results of -$1.80 versus -$1.50 in the prior year. This year, the market expects an improvement in earnings (-$1.58 versus -$1.80).
  • Investors have driven up the company's shares by 291.02% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the future course of this stock, we feel that the risks involved in investing in CEMP 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 slightly increased to -$13.19 million or 4.62% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -38.87%.

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