Today's Dead Cat Bounce Stock Is 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 "dead cat bounce" (down big yesterday but up 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 $12.8 million.
  • AVEO has traded 702,867 shares today.
  • AVEO is up 3.5% today.
  • AVEO was down 7.8% 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 3.8 million shares per day over the past 30 days. AVEO has a market cap of $119.5 million and is part of the health care sector and drugs industry. The stock has a beta of 1.76 and a short float of 4.1% with 0.35 days to cover. Shares are up 138% year-to-date as of the close of trading on Friday.

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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 unimpressive growth in net income, disappointing return on equity and generally high debt management risk.

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 when compared to that of the S&P 500 and the Biotechnology industry. The net income has significantly decreased by 68.6% when compared to the same quarter one year ago, falling from -$6.45 million to -$10.87 million.
  • 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.
  • The debt-to-equity ratio of 1.23 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, AVEO has managed to keep a strong quick ratio of 1.62, which demonstrates the ability to cover short-term cash needs.
  • AVEO, with its very weak revenue results, has greatly underperformed against the industry average of 21.9%. Since the same quarter one year prior, revenues plummeted by 99.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • AVEO PHARMACEUTICALS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AVEO PHARMACEUTICALS INC continued to lose money by earning -$1.02 versus -$2.10 in the prior year. This year, the market expects an improvement in earnings (-$0.87 versus -$1.02).

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