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PDC Energy (PDCE) Showing Signs Of Being A Roof Leaker

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 PDC Energy ( PDCE) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified PDC Energy as such a stock due to the following factors:

  • PDCE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $54.7 million.
  • PDCE has traded 262,619 shares today.
  • PDCE is trading at 2.51 times the normal volume for the stock at this time of day.
  • PDCE crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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

More details on PDCE:

PDC Energy, Inc., an independent exploration and production company, acquires, explores for, develops, and produces crude oil, natural gas, and natural gas liquids in the United States. PDCE has a PE ratio of 128.2. Currently there are 10 analysts that rate PDC Energy a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for PDC Energy has been 962,500 shares per day over the past 30 days. PDC Energy has a market cap of $2.2 billion and is part of the basic materials sector and energy industry. The stock has a beta of 2.53 and a short float of 15.9% with 4.71 days to cover. Shares are up 14.9% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates PDC Energy 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:

  • PDCE's very impressive revenue growth greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues leaped by 81.3%. 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 94.6% when compared to the same quarter one year prior, rising from -$39.42 million to -$2.13 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • PDCE's debt-to-equity ratio of 0.69 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. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.77 is weak.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, PDC ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.

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