Today's Weak On High Volume Stock: Ironwood Pharmaceuticals (IRWD)

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

  • IRWD has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $14.1 million.
  • IRWD has traded 109,197 shares today.
  • IRWD is trading at 4.89 times the normal volume for the stock at this time of day.
  • IRWD is trading at a new low 3.05% 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 IRWD:

Ironwood Pharmaceuticals, Inc., a pharmaceutical company, engages in the research, development, and commercialization of human therapeutic products. Currently there are 2 analysts that rate Ironwood Pharmaceuticals a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for Ironwood Pharmaceuticals has been 1.0 million shares per day over the past 30 days. Ironwood has a market cap of $1.8 billion and is part of the health care sector and drugs industry. The stock has a beta of 1.19 and a short float of 16.8% with 13.21 days to cover. Shares are down 7.9% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Ironwood Pharmaceuticals as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally high debt management risk.

Highlights from the ratings report include:
  • 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, IRONWOOD PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 2.56 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 4.17, which shows the ability to cover short-term cash needs.
  • In its most recent trading session, IRWD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
  • The company, on the basis of net income growth 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 increased by 33.0% when compared to the same quarter one year prior, rising from -$49.63 million to -$33.22 million.
  • IRONWOOD PHARMACEUTICALS INC has improved earnings per share by 36.8% 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, IRONWOOD PHARMACEUTICALS INC continued to lose money by earning -$1.39 versus -$2.38 in the prior year. This year, the market expects an improvement in earnings (-$0.68 versus -$1.39).

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