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Water-Logged And Getting Wetter Stock Of The Day: QEP Resources (QEP)

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 QEP Resources (QEP) 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 QEP Resources as such a stock due to the following factors:

  • QEP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $44.4 million.
  • QEP has traded 5.7 million shares today.
  • QEP traded in a range 212% of the normal price range with a price range of $1.68.
  • QEP traded below its daily resistance level (quality: 466 days, meaning that the stock is crossing a resistance level set by the last 466 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.

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More details on QEP:

QEP Resources, Inc., through its subsidiaries, operates as an independent oil and natural gas exploration and production company. The stock currently has a dividend yield of 0.2%. QEP has a PE ratio of 30.8. Currently there are 7 analysts that rate QEP Resources a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for QEP Resources has been 2.4 million shares per day over the past 30 days. QEP has a market cap of $5.8 billion and is part of the basic materials sector and energy industry. The stock has a beta of 2.16 and a short float of 4.6% with 4.84 days to cover. Shares are up 4.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates QEP Resources as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 3.3%. Since the same quarter one year prior, revenues rose by 42.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 1303.2% when compared to the same quarter one year prior, rising from -$3.10 million to $37.30 million.
  • QEP RESOURCES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, QEP RESOURCES INC reported lower earnings of $0.72 versus $1.49 in the prior year. This year, the market expects an improvement in earnings ($1.37 versus $0.72).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, QEP RESOURCES INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • QEP's debt-to-equity ratio of 0.84 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that QEP's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.63 is low and demonstrates weak liquidity.

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