2-Star Stocks Poised to Plunge: ISTA Pharmaceuticals?

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

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

ISTAfacts

Headquarters (Founded)Irvine, Calif. (1992)
Market Cap$350.7 million
IndustryPharmaceuticals
Trailing-12-Month Revenue$166.4 million
ManagementCEO Dr. Vicente Anido, Jr. (since 2001)
CFO Lauren Silvernail (since 2003)
Return on Assets (Average, Past 3 Years)1.1%
Cash/Debt$51.9 million / $64.9 million
CompetitorsAllergan
Bausch & Lomb
Novartis

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

On CAPS, 11% of the 106 members who have rated ISTA believe the stock will underperform the S&P 500 going forward.

Just a couple of days ago, one of those bears, All-Star zzlangerhans, touched on the stock's seemingly unsustainable valuation:
 

ISTA has surprisingly maintained the dramatic elevation in share price that came about due to Valeant's takeout bid, despite the fact that Valeant has moved on from the stalled negotiations and purchased Eyetech instead. The share price is nearly triple the low of [$3.11] seen in October after disappointing revenue growth, failure of phase III trials of Remura in dry eye, and broad market weakness.

The street may still be buying ISTA's high self-esteem but I'm seeing little in the way of pipeline catalysts to provide scaffolding for the lofty share price. If the company isn't able to provide growth in revenues and steady profits in the first two quarters of 2012 there's little to prevent a return to the [$4.00] range.

What do you think about ISTA, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

Want to see how well (or not so well) the stocks in this series are performing? Follow the newTrackPoisedToCAPS account.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Novartis. 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.

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