Strong On High Volume: Vanda Pharmaceuticals (VNDA)

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

  • VNDA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $6.3 million.
  • VNDA has traded 180,528 shares today.
  • VNDA is trading at 5.65 times the normal volume for the stock at this time of day.
  • VNDA is trading at a new high 9.02% 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 VNDA:

Vanda Pharmaceuticals Inc., a biopharmaceutical company, focuses on the development and commercialization of products for the treatment of central nervous system disorders. VNDA has a PE ratio of 16.5. Currently there are 3 analysts that rate Vanda Pharmaceuticals a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Vanda Pharmaceuticals has been 760,200 shares per day over the past 30 days. Vanda has a market cap of $379.9 million and is part of the health care sector and drugs industry. Shares are down 36.5% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Vanda Pharmaceuticals as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • VNDA's very impressive revenue growth greatly exceeded the industry average of 21.4%. Since the same quarter one year prior, revenues leaped by 75.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • VNDA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 17.14, which clearly demonstrates the ability to cover short-term cash needs.
  • VANDA PHARMACEUTICALS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, VANDA PHARMACEUTICALS INC turned its bottom line around by earning $0.30 versus -$0.68 in the prior year. For the next year, the market is expecting a contraction of 346.7% in earnings (-$0.74 versus $0.30).
  • VNDA's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 34.32%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • Net operating cash flow has decreased to -$13.39 million or 10.14% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, VANDA PHARMACEUTICALS INC has marginally lower results.

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