Trade-Ideas: Medivation (MDVN) Is Today's

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 Medivation ( MDVN) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Medivation as such a stock due to the following factors:

  • MDVN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $112.1 million.
  • MDVN has traded 203,562 shares today.
  • MDVN is trading at 2.57 times the normal volume for the stock at this time of day.
  • MDVN crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on MDVN:

Medivation, Inc., a biopharmaceutical company, focuses on the development and commercialization of novel therapies to treat serious diseases in the United States. It offers XTANDI for the treatment of post-chemotherapy metastatic castration-resistant prostate cancer (mCRPC) patients. MDVN has a PE ratio of 32. Currently there are 11 analysts that rate Medivation a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Medivation has been 952,700 shares per day over the past 30 days. Medivation has a market cap of $9.3 billion and is part of the health care sector and drugs industry. The stock has a beta of 0.44 and a short float of 5.2% with 3.39 days to cover. Shares are up 18.5% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Medivation as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and notable return on equity. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 21.6%. Since the same quarter one year prior, revenues rose by 48.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 77.77% and other important driving factors, this stock has surged by 52.20% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Despite currently having a low debt-to-equity ratio of 0.52, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 6.70 is very high and demonstrates very strong liquidity.
  • MEDIVATION 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, MEDIVATION INC turned its bottom line around by earning $3.46 versus -$0.58 in the prior year. For the next year, the market is expecting a contraction of 25.1% in earnings ($2.59 versus $3.46).
  • The gross profit margin for MEDIVATION INC is currently extremely low, coming in at 4.72%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, MDVN's net profit margin of -2.41% significantly underperformed when compared to the industry average.

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