Durect (DRRX) Weak On High Volume

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

  • DRRX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $2.5 million.
  • DRRX has traded 218,992 shares today.
  • DRRX is trading at 5.48 times the normal volume for the stock at this time of day.
  • DRRX is trading at a new low 7.14% 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 DRRX:

DURECT Corporation, a specialty pharmaceutical company, focuses on the development of pharmaceuticals products based on its proprietary drug formulations and delivery platform technologies in the United States, Europe, Japan, and internationally. Currently there are 3 analysts that rate Durect a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Durect has been 908,400 shares per day over the past 30 days. Durect has a market cap of $310.3 million and is part of the health care sector and drugs industry. The stock has a beta of -0.09 and a short float of 0.4% with 0.37 days to cover. Shares are up 228.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Durect as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally high debt management risk and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Pharmaceuticals industry average. The net income has significantly decreased by 34.8% when compared to the same quarter one year ago, falling from -$3.60 million to -$4.85 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 Pharmaceuticals industry and the overall market, DURECT CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$5.35 million or 96.97% 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 1.28 is relatively high when compared with the industry average, suggesting a need for better debt level management. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 5.76, which shows the ability to cover short-term cash needs.
  • DURECT CORP's earnings per share declined by 33.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, DURECT CORP continued to lose money by earning -$0.19 versus -$0.21 in the prior year. For the next year, the market is expecting a contraction of 28.9% in earnings (-$0.25 versus -$0.19).

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