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SM Energy (SM) Highlighted As Storm The Castle 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 SM Energy ( SM) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified SM Energy as such a stock due to the following factors:

  • SM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $60.6 million.
  • SM has traded 307,414 shares today.
  • SM is trading at 2.88 times the normal volume for the stock at this time of day.
  • SM crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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

More details on SM:

SM Energy Company, an independent energy company, is engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids in North America. The stock currently has a dividend yield of 0.1%. SM has a PE ratio of 23.9. Currently there are 11 analysts that rate SM Energy a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for SM Energy has been 823,900 shares per day over the past 30 days. SM Energy has a market cap of $5.2 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.86 and a short float of 4.5% with 3.06 days to cover. Shares are down 7.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SM Energy as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

  • The revenue growth greatly exceeded the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 29.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SM ENERGY CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, SM ENERGY CO turned its bottom line around by earning $2.52 versus -$0.84 in the prior year. This year, the market expects an improvement in earnings ($6.67 versus $2.52).
  • 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 292.2% when compared to the same quarter one year prior, rising from $16.73 million to $65.61 million.
  • The gross profit margin for SM ENERGY CO is currently very high, coming in at 72.28%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 10.41% is above that of the industry average.
  • Net operating cash flow has slightly increased to $299.73 million or 6.17% when compared to the same quarter last year. Despite an increase in cash flow, SM ENERGY CO's cash flow growth rate is still lower than the industry average growth rate of 16.72%.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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