Trade-Ideas LLC identified

Hess

(

HES

) 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 Hess as such a stock due to the following factors:

  • HES has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $164.8 million.
  • HES has traded 2.4 million shares today.
  • HES is trading at 3.92 times the normal volume for the stock at this time of day.
  • HES 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.

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More details on HES:

Hess Corporation, an exploration and production company, develops, produces, purchases, transports, and sells crude oil, natural gas liquids, and natural gas. The company operates in two segments, Exploration and Production, and Bakken Midstream. The stock currently has a dividend yield of 1.9%. HES has a PE ratio of 5. Currently there are 8 analysts that rate Hess a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Hess has been 3.5 million shares per day over the past 30 days. Hess has a market cap of $16.7 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.61 and a short float of 6% with 5.72 days to cover. Shares are up 10.7% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Hess as a

sell

. The company's weaknesses can be seen in multiple areas, such as its poor profit margins, weak operating cash flow, generally disappointing historical performance in the stock itself, disappointing return on equity and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • The gross profit margin for HESS CORP is currently lower than what is desirable, coming in at 33.81%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -52.31% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$60.00 million or 116.57% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, HESS CORP's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • The share price of HESS CORP has not done very well: it is down 7.22% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • HESS CORP's earnings per share declined by 30.3% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, HESS CORP swung to a loss, reporting -$10.60 versus $5.39 in the prior year. This year, the market expects an improvement in earnings (-$5.17 versus -$10.60).

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