WuXi PharmaTech (WX) Stock: Weak On High Volume Today

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

  • WX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.1 million.
  • WX has traded 210,473 shares today.
  • WX is trading at 6.61 times the normal volume for the stock at this time of day.
  • WX is trading at a new low 3.01% 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 WX:

Wuxi PharmaTech (Cayman) Inc. operates as a pharmaceutical, biotechnology, and medical device research and development services company in China and the United States. It operates through two segments, Laboratory Services and Manufacturing Services. WX has a PE ratio of 22. Currently there are 4 analysts that rate WuXi PharmaTech a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for WuXi PharmaTech has been 582,700 shares per day over the past 30 days. WuXi PharmaTech has a market cap of $3.0 billion and is part of the health care sector and health services industry. Shares are up 24.2% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates WuXi PharmaTech as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, solid stock price performance and growth in earnings per share. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.0%. Since the same quarter one year prior, revenues rose by 22.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, WX has a quick ratio of 2.04, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 25.34% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, WX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • WUXI PHARMATECH (CAYMAN)-ADR's earnings per share improvement from the most recent quarter was slightly positive. 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, WUXI PHARMATECH (CAYMAN)-ADR reported lower earnings of $1.56 versus $1.58 in the prior year. This year, the market expects an improvement in earnings ($1.76 versus $1.56).

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