Trade-Ideas LLC identified

Sanchez Energy

(

SN

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

  • SN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $15.6 million.
  • SN has traded 117,327 shares today.
  • SN is down 4.2% today.
  • SN was up 14.6% yesterday.

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More details on SN:

Sanchez Energy Corporation, an independent exploration and production company, engages in the exploration, acquisition, and development of oil and natural gas resources in the onshore U.S. Gulf Coast. Currently there are 3 analysts that rate Sanchez Energy a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Sanchez Energy has been 2.5 million shares per day over the past 30 days. Sanchez Energy has a market cap of $428.5 million and is part of the basic materials sector and energy industry. The stock has a beta of 1.49 and a short float of 15.3% with 4.55 days to cover. Shares are up 64.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Sanchez Energy as a

sell

. The company's weaknesses can be seen in multiple areas, such as its weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • Net operating cash flow has significantly decreased to $24.14 million or 62.16% 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.
  • The gross profit margin for SANCHEZ ENERGY CORP is currently extremely low, coming in at 11.40%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, SN's net profit margin of -82.40% significantly underperformed when compared to the industry average.
  • SN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 25.58%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • SN, with its decline in revenue, slightly underperformed the industry average of 24.0%. Since the same quarter one year prior, revenues fell by 27.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • SANCHEZ ENERGY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SANCHEZ ENERGY CORP reported poor results of -$25.77 versus -$1.18 in the prior year. This year, the market expects an improvement in earnings (-$0.32 versus -$25.77).

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