2-Star Stocks Poised to Plunge: Avanir Pharmaceuticals?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, drug developer Avanir Pharmaceuticals (Nasdaq: AVNR  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Avanir's business and see what CAPS investors are saying about the stock right now.

Avanir facts

Headquarters (founded) Aliso Viejo, Calif. (1988)
Market Cap $537.3 million
Industry Pharmaceuticals
Trailing-12-Month Revenue $24.5 million
Management CEO Keith Katkin
Principal Financial Officer Christine Ocampo
Return on Equity (average, past 3 years) (106.8%)
Cash/Debt $66.7 million / $0
Competitors Bristol-Myers Squibb
Eli Lilly

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 24% of the 256 members who have rated Avanir believe the stock will underperform the S&P 500 going forward.

Just last week, one of those bears, All-Star BlacknGold, touched on the stock's seemingly unsustainable price run:

This came up in a screen for stocks with the highest gains in the last 4 weeks. With a fair [book value per share] of $0.44 this company is greatly overvalued. Cash is shrinking every quarter along with shareholders' equity, which stands at only $60 million as of 1Q12. Should be an easy red-thumb target.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 07, 2012, at 8:19 AM, kfink7 wrote:

    Misses the mark. Company says comfortably cash to go thru 2013 this is without cash from expected european partner before end of 2012 and upcoming european approval, ist qtr of 2013. Month over month increase of scripts by 10 percent and accelerating. Pipline in a pill, many other indications promising, blockbusters, tests underway, MS, Alzheimers and possibly ALS>. With the large number of shorts in this stock( short squeeze will be huge) 24percent that say overvalued according to your note these are the shorts not the investors, , a small number in light of short interest. Importantly 3 of 4 covering analysts say" buy" and the other' hold' and all four analysts comments are increasingly positive, take a look, summerstreet just put out a note last week , with increasingly positive comments and a pps target of "11" which is almost a triple from here, and this is without counting in revenue from other likely indications. This will be a blockbuster.

  • Report this Comment On July 10, 2012, at 11:30 PM, reetch wrote:

    AVNR has $30 million in debt you forgot to mention in your article.

    AVNR has over 140,000,000 outstanding shares that you forgot to mention including options that have yet to be exercised.

    AVNR has over 23,000,000 short shares because shorts know the company is over valued.

    Past Performance:

    Annual Losses

    2005 -- NetLoss -- ($30,606,564)

    2006 -- NetLoss -- ($62,552,814)

    2007 -- NetLoss -- ($20,933,453)

    2008 -- NetLoss -- ($17,495,739)

    2009 -- NetLoss -- ($21,996,016)

    2010 -- NetLoss -- ($26,694,148)

    2011 -- NetLoss -- ($60,631,563)

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