Orexigen Therapeutics (OREX) Highlighted As Weak On High Volume

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 Orexigen Therapeutics ( OREX) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Orexigen Therapeutics as such a stock due to the following factors:

  • OREX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $17.7 million.
  • OREX has traded 3.4 million shares today.
  • OREX is trading at 12.16 times the normal volume for the stock at this time of day.
  • OREX is trading at a new low 10.12% 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 OREX:

Orexigen Therapeutics, Inc., a biopharmaceutical company, focuses on the development of pharmaceutical products in the United States. The company offers Contrave for the treatment of obesity. Currently there are 6 analysts that rate Orexigen Therapeutics a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Orexigen Therapeutics has been 5.8 million shares per day over the past 30 days. Orexigen has a market cap of $859.0 million and is part of the health care sector and drugs industry. The stock has a beta of 2.15 and a short float of 28.2% with 9.66 days to cover. Shares are up 13.2% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Orexigen Therapeutics as a sell. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally high debt management risk.

Highlights from the ratings report include:
  • The gross profit margin for OREXIGEN THERAPEUTICS INC is currently extremely low, coming in at 10.62%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, OREX's net profit margin of 2.64% is significantly lower than the industry average.
  • The debt-to-equity ratio is very high at 3.76 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 7.00, which shows the ability to cover short-term cash needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Biotechnology industry and the overall market, OREXIGEN THERAPEUTICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • OREXIGEN THERAPEUTICS 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, OREXIGEN THERAPEUTICS INC continued to lose money by earning -$0.35 versus -$0.80 in the prior year. For the next year, the market is expecting a contraction of 72.8% in earnings (-$0.61 versus -$0.35).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Biotechnology industry. The net income increased by 102.8% when compared to the same quarter one year prior, rising from -$21.49 million to $0.61 million.

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