Foundation Medicine (FMI): Today's Weak On High 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 Foundation Medicine ( FMI) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Foundation Medicine as such a stock due to the following factors:

  • FMI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $8.2 million.
  • FMI has traded 67,819 shares today.
  • FMI is trading at 6.18 times the normal volume for the stock at this time of day.
  • FMI is trading at a new low 10.03% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of 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 (or avoid losses by trimming weak positions). 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 FMI:

Foundation Medicine, Inc. provides various molecular information products in the United States. Currently there are 2 analysts that rate Foundation Medicine a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Foundation Medicine has been 279,200 shares per day over the past 30 days. Foundation Medicine has a market cap of $1.5 billion and is part of the health care sector and health services industry. Shares are up 94.8% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Foundation Medicine as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow and feeble growth in its earnings per share.

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 Biotechnology industry average, but is greater than that of the S&P 500. The net income has decreased by 1.6% when compared to the same quarter one year ago, dropping from -$13.09 million to -$13.30 million.
  • Net operating cash flow has decreased to -$13.61 million or 35.85% 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.
  • FOUNDATION MEDICINE INC's earnings per share improvement from the most recent quarter was slightly positive. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, FOUNDATION MEDICINE INC reported poor results of -$1.86 versus -$0.94 in the prior year. For the next year, the market is expecting a contraction of 9.4% in earnings (-$2.04 versus -$1.86).
  • The gross profit margin for FOUNDATION MEDICINE INC is rather high; currently it is at 68.16%. Regardless of FMI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FMI's net profit margin of -71.18% significantly underperformed when compared to the industry average.
  • Compared to other companies in the Biotechnology industry and the overall market, FOUNDATION MEDICINE INC's return on equity significantly trails that of both the industry average and the S&P 500.

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