Seattle Genetics (SGEN) 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.

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

  • SGEN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $64.9 million.
  • SGEN has traded 741,789 shares today.
  • SGEN is down 3% today.
  • SGEN was up 8.1% yesterday.

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More details on SGEN:

Seattle Genetics, Inc., a biotechnology company, develops and commercializes antibody-based therapies for the treatment of cancer. Currently there are 5 analysts that rate Seattle Genetics a buy, 2 analysts rate it a sell, and 4 rate it a hold.

The average volume for Seattle Genetics has been 1.2 million shares per day over the past 30 days. Seattle has a market cap of $4.8 billion and is part of the health care sector and drugs industry. The stock has a beta of 2.36 and a short float of 30.2% with 11.06 days to cover. Shares are up 28% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Seattle Genetics as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • SEATTLE GENETICS INC's earnings per share declined by 30.8% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, SEATTLE GENETICS INC reported poor results of -$0.62 versus -$0.52 in the prior year. For the next year, the market is expecting a contraction of 22.6% in earnings (-$0.76 versus -$0.62).
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Biotechnology industry average. The net income has significantly decreased by 33.0% when compared to the same quarter one year ago, falling from -$16.30 million to -$21.69 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 Biotechnology industry and the overall market, SEATTLE GENETICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for SEATTLE GENETICS INC is currently very high, coming in at 89.80%. Regardless of SGEN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SGEN's net profit margin of -26.40% significantly underperformed when compared to the industry average.
  • Compared to where it was a year ago, the stock is now trading at a higher level, and has traded in line with the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.

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