2-Star Stocks Poised to Plunge: Sunesis 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, drug developer Sunesis Pharmaceuticals (NAS: SNSS) has received a distressing two-star ranking.

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

Sunesis facts

Headquarters (founded)South San Francisco, Calif. (1998)
Market Cap$296.3 million
IndustryBiotechnology
Trailing-12-Month Revenue$2.5 million
ManagementCEO Daniel Swisher, Jr. (since 2004)
CFO Eric Bjerkholt (since 2004)
Return on Capital (average, past 3 years)(50.5%)
Cash/Debt$29.3 million/$9.6 million
CompetitorsAstraZeneca
Corden Pharma Switzerland LLC
Pfizer

Source: S&P Capital IQ; Motley Fool CAPS.

On CAPS, 23% of the 97 members who have rated Sunesis believe the stock will underperform the S&P 500 going forward.

Just last week, one of those Fools, All-Star zzlangerhans, touched on the stock's seemingly unsustainable valuation:

If Sunesis deserves a [$300M] market cap for postponed topline data in 2014 and [$29M] in cash, what would they have deserved if the trial had continued without a change in enrollment and topline data in 2013? [$600M]? The continued run-up in the share price makes no logical sense. It implies that prior to interim data the stock was priced for early termination of VALOR for futility.

If Sunesis stood alone as an apparent runaway stock, I'd be more concerned that I was missing critical information. But at this time, the sector seems to be chock-a-block with disproportionately capped companies that have long track records of failure. Eventually this bullish worm will turn and the true winners will be separated from the dart throwers.

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The article 2-Star Stocks Poised to Plunge: Sunesis Pharmaceuticals? originally appeared on Fool.com.

Fool contributorBrian Pacamparaowns no position in any of the companies mentioned. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Fool'sdisclosure policyalways gets a perfect score.

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