Spotlight: Akorn, Inc.

What is happening to Akorn (NASDAQ:AKRX)? Its stock price increased a staggering 23% from 15 to 28 October, but from there on it has also decreased 17%. Akorn, a pharmaceutical company that focuses on diagnostic, therapeutic ophthalmic and injectable pharmaceuticals, recently announced its third quarterly results, which immediately lead to a decline of 10% of its stock price. The earnings per share were -$0.11, which disappointed investors. However, it should be noted that this is due to incidental costs. Earnings per share were $0.27 which beat market consensus by 2 cents. Yet, a lot of investors seem to lose thrust in its future performance. An indication that the stock was overpriced could be the Vice-President of Akorn, who sold a substantial amount of his Akorn shares when it was trading at $44.27. This causes us to believe that he has information on the real value of Akorn stock and that he felt the stock was currently overpriced as afterwards the stock price reverted to the range of $36-$39, meaning that the stock could now be trading at its real value. If we then take a look at Akorn's P/E-ratio, we see that Akorn stock is trading at a staggering 135 times its earning per share. Indicating that investors either expect substantial growth from this stock or that the stock is still highly overpriced. Since there is no real evidence that Akorn is producing or even researching a product that is to increase revenues substantially, we also don't expect a major change in revenues and thus in profits. Consequently, we feel that the Akorn stock is still overpriced and that it does not reflect future cash flows.