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Perilous Reversal Watch: Goodrich Petroleum (GDP)

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 Goodrich Petroleum ( GDP) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Goodrich Petroleum as such a stock due to the following factors:

  • GDP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $32.1 million.
  • GDP has traded 87,057 shares today.
  • GDP is down 3% today.
  • GDP was up 6% yesterday.

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More details on GDP:

Goodrich Petroleum Corporation, an independent oil and natural gas company, engages in the exploration, development, and production of oil and natural gas. Currently there are 11 analysts that rate Goodrich Petroleum a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Goodrich Petroleum has been 1.8 million shares per day over the past 30 days. Goodrich has a market cap of $832.0 million and is part of the basic materials sector and energy industry. The stock has a beta of 2.93 and a short float of 28.1% with 4.55 days to cover. Shares are up 116.6% year to date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Goodrich Petroleum as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 318.3% when compared to the same quarter one year ago, falling from $12.41 million to -$27.09 million.
  • Net operating cash flow has significantly decreased to $4.98 million or 74.64% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • GOODRICH PETROLEUM CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GOODRICH PETROLEUM CORP reported poor results of -$2.48 versus -$1.05 in the prior year. This year, the market expects an improvement in earnings (-$2.36 versus -$2.48).
  • The gross profit margin for GOODRICH PETROLEUM CORP is currently very high, coming in at 78.48%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -47.38% is in-line with the industry average.
  • Compared to its closing price of one year ago, GDP's share price has jumped by 158.99%, exceeding the performance of the broader market during that same time frame. Regarding the future course of this stock, we feel that the risks involved in investing in GDP do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

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