Perilous Reversal Stock: AVEO Pharmaceuticals (AVEO)

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

  • AVEO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $22.1 million.
  • AVEO has traded 16.4 million shares today.
  • AVEO is down 3.6% today.
  • AVEO was up 39.4% yesterday.

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More details on AVEO:

AVEO Pharmaceuticals, Inc., a biopharmaceutical company, develops targeted therapies for patients with cancer and related diseases. Currently there are no analysts that rate AVEO Pharmaceuticals a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for AVEO Pharmaceuticals has been 1.5 million shares per day over the past 30 days. AVEO has a market cap of $88.1 million and is part of the health care sector and drugs industry. The stock has a beta of 1.01 and a short float of 0.4% with 0.01 days to cover. Shares are up 165.4% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates AVEO Pharmaceuticals as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow 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, AVEO PHARMACEUTICALS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to -$11.03 million or 27.38% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio of 1.00 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, AVEO's quick ratio is somewhat strong at 1.43, demonstrating the ability to handle short-term liquidity needs.
  • 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 16.9% when compared to the same quarter one year prior, going from -$16.73 million to -$13.89 million.
  • AVEO, with its very weak revenue results, has greatly underperformed against the industry average of 19.9%. Since the same quarter one year prior, revenues plummeted by 64.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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