Today's Perilous Reversal Stock: Thoratec (THOR)

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

  • THOR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $31.2 million.
  • THOR has traded 58,863 shares today.
  • THOR is down 3.3% today.
  • THOR was up 8.2% yesterday.

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More details on THOR:

Thoratec Corporation, together with its subsidiaries, develops, manufactures, and markets proprietary medical devices used for mechanical circulatory support for the treatment of heart failure patients. THOR has a PE ratio of 46.1. Currently there are 6 analysts that rate Thoratec a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Thoratec has been 579,700 shares per day over the past 30 days. Thoratec has a market cap of $2.2 billion and is part of the health care sector and health services industry. The stock has a beta of 0.50 and a short float of 10.3% with 5.48 days to cover. Shares are up 36.6% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Thoratec as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • THOR 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 4.65, which clearly demonstrates the ability to cover short-term cash needs.
  • Compared to its closing price of one year ago, THOR's share price has jumped by 32.08%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • THOR, with its decline in revenue, slightly underperformed the industry average of 1.1%. Since the same quarter one year prior, revenues slightly dropped by 3.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 Health Care Equipment & Supplies industry. The net income has significantly decreased by 40.9% when compared to the same quarter one year ago, falling from $18.24 million to $10.78 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Health Care Equipment & Supplies industry and the overall market, THORATEC CORP's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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