EnteroMedics (ETRM) stock is currently trading at $0,0665, down 4.71% or $0.0033. The stock started the year at $1.95 and is now trading for mere pennies on the dollar. At current prices, the company is worth an estimated $6.05 million. The company has a price/earnings ratio of -$0.02, and an Earnings Per Share (EPS) of -$2.89. There is no dividend or yield to speak of and the 1-year price target of the stock is an ambitious $1.10. Based on its current price, the stock is regarded as a buy/hold proposition.

Is there any reason for optimism with this stock?

On a ratings scale of 1.0 (strong buy) to 5.0 (sell), the stock is at 2.5. Revenues have been volatile since 2013, albeit in negative territory. 2013 revenues were $-25.78 million, followed by $-26.13 million in 2014, and a much-improved figure of – $25.2 million in 2015. Nonetheless, with negative annual earnings, there is little to be optimistic about with the stock. Another factor weighing heavily on demand for EnteroMedics (ETRM) is the penny-stock nature of it. It was trading at a 52-week high of $3 and a 52-week low of $0.05. The current stock price is hovering near the 1-year low, and this presents day traders with the perfect buying opportunity to cash in before the stock does a 180° turn.

Analysis of Earnings for EnteroMedics (ETRM) Stock

Based on the recent Q3 2016 earnings of the stock, we can list a few of the highlights:

• Non-operational activity led to sharper earnings declines, however there was an improvement in pre-tax owning margins from -6,485.42 percent to just -2,197.89 percent.
• There was an improvement in gross margins to 50.59% from -12.94% (year-on-year). Margins improved from -9,315.11% to -1,491.28%.
• Net earnings amounted to $-6.52 million while revenues came in at $0.30 million.

Recent trends for the stock show a strong improvement in revenues from Q3 2015 through Q3 2016. The figures improved in the final two quarters of 2015 from $0.06 to $0.15 in Q4. For 2016, revenues in Q1 improved from $0.07 to $0.28 by June 30, 2016. Revenue growth held at zero since Q3 2015 through Q1 2016. However, revenue grew by 249.37% by the end of Q2 2016. Earnings growth this year has improved from negative figures to 32.53% by the end of Q2.

It should be pointed out that while net margin percentages are strongly negative, they have improved dramatically between Q1 2016 and the end of Q2 2016. EnteroMedics (ETRM) stock continues to post negative returns on assets at -133.91% (Q2 2016), but this figure has been steadily improving for the year to date. In terms of return on equity, there is nothing to speak of.

What Do the Charts Say about EnteroMedics (ETRM) stock?

A cursory look at the charts reveals a median trend of slowly increasing revenues between Q3 2015 and Q2 2016. However, revenues have been declining since the end of Q2 through September 30, 2016. Day traders will be heartened by the reversal in the industry, since it presents buying opportunities. In terms of earnings history, EnteroMedics' stock has been bearish for the past 4 fiscal quarters. While the peer median figure indicates growth between December 31, 2015 and March 31, 2016, EnteroMedics' stock declined precipitously from -6.77% to -7.41%. Since then however there has been a quasi-recovery to -5%. Recent declines to -6.52% were reported in Q3 2016.

All of this information is confirmed in the above charts which indicate an underperformance of EnteroMedics stock against its peers. Overall, this penny stock has few if any bright spots on the horizon. It is underperforming on every level, and has limited upside momentum. If we look at the 4 quadrants of one-time variables: one time favorables, operation driven earnings, low earnings base and one-time unfavorables, the stock fits in the lower earnings base quadrant with a negative pre-tax margin. Its EBIT margin history has been in the red for the past 4 fiscal quarters and remains in the red as at September 30, 2016 (-1,504.53).

In summary, day traders will be excited about the 35.90% appreciation over the past 5 days, but in reality the stock is a gross underperformer. It is good for high volume traders seeking to generate sharp returns in double-quick time. With US markets closed for the Thanksgiving holiday, Monday momentum will be difficult to gauge.