Strong On High Volume: Zogenix (ZGNX)

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 Zogenix ( ZGNX) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Zogenix as such a stock due to the following factors:

  • ZGNX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $2.6 million.
  • ZGNX has traded 742,207 shares today.
  • ZGNX is trading at 5.46 times the normal volume for the stock at this time of day.
  • ZGNX is trading at a new high 5.37% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 ZGNX:

Zogenix, Inc., a pharmaceutical company, develops and commercializes therapies for the treatment of central nervous system disorders in the United States. Its marketed product includes Zohydro ER, an extended-release formulation of hydrocodone for the treatment of severe chronic pain. ZGNX has a PE ratio of 18. Currently there are 5 analysts that rate Zogenix a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Zogenix has been 3.2 million shares per day over the past 30 days. Zogenix has a market cap of $214.7 million and is part of the health care sector and drugs industry. Shares are up 2.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Zogenix as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins and generally disappointing historical performance in the stock itself.

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 Pharmaceuticals industry average, but is greater than that of the S&P 500. The net income has decreased by 9.2% when compared to the same quarter one year ago, dropping from -$20.93 million to -$22.86 million.
  • The gross profit margin for ZOGENIX INC is rather low; currently it is at 21.93%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -495.47% is significantly below that of the industry average.
  • ZGNX's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 27.84%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • ZOGENIX INC has improved earnings per share by 22.2% 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, ZOGENIX INC turned its bottom line around by earning $0.13 versus -$0.72 in the prior year. For the next year, the market is expecting a contraction of 476.9% in earnings (-$0.49 versus $0.13).
  • The revenue fell significantly faster than the industry average of 1.9%. Since the same quarter one year prior, revenues fell by 37.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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