Horizon Pharma (HZNP) Marked As A Barbarian At The Gate

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 Horizon Pharma ( HZNP) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Horizon Pharma as such a stock due to the following factors:

  • HZNP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $136.0 million.
  • HZNP has traded 1.9 million shares today.
  • HZNP traded in a range 221.8% of the normal price range with a price range of $2.37.
  • HZNP traded above its daily resistance level (quality: 3 days, meaning that the stock is crossing a resistance level set by the last 3 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on HZNP:

Horizon Pharma plc, a specialty biopharmaceutical company, engages in identifying, developing, acquiring or in-licensing, and commercializing medicines for the treatment of arthritis, pain, inflammatory, and/or orphan diseases in the United States and internationally. Currently there are 9 analysts that rate Horizon Pharma a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Horizon Pharma has been 4.0 million shares per day over the past 30 days. Horizon has a market cap of $5.2 billion and is part of the health care sector and drugs industry. The stock has a beta of 2.26 and a short float of 10.9% with 2.98 days to cover. Shares are up 154.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Horizon Pharma as a sell. Among the areas we feel are negative, one of the most important has been weak operating cash flow.

Highlights from the ratings report include:
  • Net operating cash flow has significantly decreased to -$70.74 million or 9244.64% 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 gross profit margin for HORIZON PHARMA PLC is currently very high, coming in at 93.49%. Regardless of HZNP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, HZNP's net profit margin of -17.28% significantly underperformed when compared to the industry average.
  • Compared to other companies in the Pharmaceuticals industry and the overall market, HORIZON PHARMA PLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • HORIZON PHARMA PLC reported significant earnings per share improvement in the most recent quarter compared to 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, HORIZON PHARMA PLC reported poor results of -$3.70 versus -$2.29 in the prior year. This year, the market expects an improvement in earnings ($1.20 versus -$3.70).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Pharmaceuticals industry average. The net income increased by 90.5% when compared to the same quarter one year prior, rising from -$206.25 million to -$19.55 million.

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