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Laredo Petroleum Holdings (LPI) Is Today's Water-Logged And Getting Wetter Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Laredo Petroleum Holdings ( LPI) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Laredo Petroleum Holdings as such a stock due to the following factors:

  • LPI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $42.0 million.
  • LPI has traded 75,586 shares today.
  • LPI traded in a range 220.4% of the normal price range with a price range of $3.38.
  • LPI traded below its daily resistance level (quality: 36 days, meaning that the stock is crossing a resistance level set by the last 36 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in LPI with the Ticky from Trade-Ideas. See the FREE profile for LPI NOW at Trade-Ideas

More details on LPI:

Laredo Petroleum Holdings, Inc., an independent energy company, focuses on the acquisition, exploration, development, and production of oil and natural gas primarily in the Permian and Mid-Continent regions of the United States. LPI has a PE ratio of 106.1. Currently there are 8 analysts that rate Laredo Petroleum Holdings a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Laredo Petroleum Holdings has been 1.4 million shares per day over the past 30 days. Laredo has a market cap of $4.7 billion and is part of the basic materials sector and energy industry. Shares are up 81.1% year to date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Laredo Petroleum Holdings as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity and premium valuation.

Highlights from the ratings report include:

  • Currently the debt-to-equity ratio of 1.65 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, LPI has a quick ratio of 0.50, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LAREDO PETROLEUM HLDGS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Investors have driven up the company's shares by 56.57% over the past year, a rise that has exceeded that of the S&P 500 Index. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • LAREDO PETROLEUM HLDGS INC has improved earnings per share by 12.5% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, LAREDO PETROLEUM HLDGS INC's EPS of $0.47 remained unchanged from the prior years' EPS of $0.47. This year, the market expects an improvement in earnings ($0.64 versus $0.47).

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