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Cheniere Energy (LNG) 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 Cheniere Energy (LNG) 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 Cheniere Energy as such a stock due to the following factors:

  • LNG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $160.7 million.
  • LNG has traded 896,146 shares today.
  • LNG traded in a range 215.1% of the normal price range with a price range of $3.06.
  • LNG traded below its daily resistance level (quality: 39 days, meaning that the stock is crossing a resistance level set by the last 39 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 LNG with the Ticky from Trade-Ideas. See the FREE profile for LNG NOW at Trade-Ideas

More details on LNG:

Cheniere Energy, Inc., an energy company, engages in the liquefied natural gas (LNG) related business. It operates through two segments, LNG Terminal Business, and LNG and Natural Gas Marketing Business. Currently there are 4 analysts that rate Cheniere Energy a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for Cheniere Energy has been 3.6 million shares per day over the past 30 days. Cheniere Energy has a market cap of $9.7 billion and is part of the basic materials sector and energy industry. The stock has a beta of 5.02 and a short float of 6.6% with 3.70 days to cover. Shares are up 116.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Cheniere Energy as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and generally higher debt management risk.

Highlights from the ratings report include:

  • LNG's revenue growth has slightly outpaced the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 2.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 142.04% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The gross profit margin for CHENIERE ENERGY INC is rather high; currently it is at 55.40%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, LNG's net profit margin of -148.90% significantly underperformed when compared to the industry average.
  • The debt-to-equity ratio is very high at 19.27 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 4.59, which shows the ability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CHENIERE ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.

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