Today's Perilous Reversal Stock: Sarepta Therapeutics (SRPT)

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

  • SRPT has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $15.3 million.
  • SRPT has traded 58,096 shares today.
  • SRPT is down 6% today.
  • SRPT was up 11.4% yesterday.

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More details on SRPT:

Sarepta Therapeutics, Inc., a biopharmaceutical company, focuses on the discovery and development of RNA-based therapeutics for the treatment of rare, infectious, and other diseases. Currently there are 6 analysts that rate Sarepta Therapeutics a buy, no analysts rate it a sell, and 10 rate it a hold.

The average volume for Sarepta Therapeutics has been 797,400 shares per day over the past 30 days. Sarepta has a market cap of $548.8 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 32.8% with 12.05 days to cover. Shares are down 8.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Sarepta Therapeutics 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, feeble growth in its earnings per share 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 403.6% when compared to the same quarter one year ago, falling from -$8.82 million to -$44.42 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Biotechnology industry and the overall market, SAREPTA THERAPEUTICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to -$25.45 million or 42.79% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • SAREPTA THERAPEUTICS 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. Stable earnings per share over the past year indicate the company has managed its earnings and share float. We anticipate this stability to falter in the coming year and, in turn, the company to deliver lower earnings per share than prior full year. During the past fiscal year, SAREPTA THERAPEUTICS INC's EPS of -$3.39 remained unchanged from the prior years' EPS of -$3.39. For the next year, the market is expecting a contraction of 22.9% in earnings (-$4.17 versus -$3.39).
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 67.15%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 369.56% 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.

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