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Today's Dead Cat Bounce Stock: Halcon Resources (HK)

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 Halcon Resources ( HK) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Halcon Resources as such a stock due to the following factors:

  • HK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $40.8 million.
  • HK has traded 1.7 million shares today.
  • HK is up 3.1% today.
  • HK was down 6.4% yesterday.

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More details on HK:

Halcon Resources Corporation, an independent energy company, is engaged in the acquisition, production, exploration, and development of onshore oil and natural gas properties in the United States. Currently there are 5 analysts that rate Halcon Resources a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Halcon Resources has been 6.8 million shares per day over the past 30 days. Halcon has a market cap of $2.9 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.22 and a short float of 23.5% with 8.50 days to cover. Shares are up 65.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Halcon Resources as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 3.2%. Since the same quarter one year prior, revenues rose by 44.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 188.53% to $159.50 million when compared to the same quarter last year. In addition, HALCON RESOURCES CORP has also vastly surpassed the industry average cash flow growth rate of 17.51%.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The debt-to-equity ratio is very high at 2.56 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.46, which clearly demonstrates the inability 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, HALCON RESOURCES CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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