Today's Weak On High Volume Stock: Arrowhead Research (ARWR)

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

  • ARWR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $7.2 million.
  • ARWR has traded 997,166 shares today.
  • ARWR is trading at 7.71 times the normal volume for the stock at this time of day.
  • ARWR is trading at a new low 3.06% 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 ARWR:

Arrowhead Research Corporation develops novel drugs to treat intractable diseases in the United States. ARWR has a PE ratio of 74. Currently there are 2 analysts that rate Arrowhead Research a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Arrowhead Research has been 1.4 million shares per day over the past 30 days. Arrowhead Research has a market cap of $398.0 million and is part of the health care sector and drugs industry. The stock has a beta of 2.48 and a short float of 26.6% with 14.03 days to cover. Shares are down 9.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Arrowhead Research 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 disappointing historical performance in the stock itself 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 significantly underperformed when compared to that of the S&P 500 and the Biotechnology industry. The net income has significantly decreased by 105.7% when compared to the same quarter one year ago, falling from -$13.94 million to -$28.69 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, ARROWHEAD RESEARCH 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 -$16.37 million or 112.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 54.62%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 64.51% compared to the year-earlier 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.
  • ARROWHEAD RESEARCH CORP 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ARROWHEAD RESEARCH CORP continued to lose money by earning -$1.23 versus -$1.32 in the prior year. For the next year, the market is expecting a contraction of 30.5% in earnings (-$1.61 versus -$1.23).

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