Trade-Ideas LLC identified

Ecopetrol

(

EC

) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Ecopetrol as such a stock due to the following factors:

  • EC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $16.2 million.
  • EC has traded 140,335 shares today.
  • EC is down 3.4% today.
  • EC was up 5.3% yesterday.

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More details on EC:

Ecopetrol S.A., an integrated oil company, engages in the exploration, development, and production of crude oil and natural gas primarily in Colombia, Peru, Brazil, Angola, and the United States Gulf Coast. The stock currently has a dividend yield of 12.6%. EC has a PE ratio of 1566. Currently there is 1 analyst that rates Ecopetrol a buy, 2 analysts rate it a sell, and 1 rates it a hold.

The average volume for Ecopetrol has been 1.3 million shares per day over the past 30 days. Ecopetrol has a market cap of $17.0 billion and is part of the basic materials sector and energy industry. Shares are up 24.4% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Ecopetrol as a

sell

. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:

  • ECOPETROL SA has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, ECOPETROL SA reported lower earnings of $1.55 versus $3.31 in the prior year. For the next year, the market is expecting a contraction of 67.1% in earnings ($0.51 versus $1.55).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 89.2% when compared to the same quarter one year ago, falling from $1,019.03 million to $110.40 million.
  • The debt-to-equity ratio of 1.07 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, EC maintains a poor quick ratio of 0.89, which illustrates the inability to avoid short-term cash problems.
  • 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 on the basis of return on equity, ECOPETROL SA underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Net operating cash flow has significantly decreased to $1,049.10 million or 62.63% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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