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.

Trade-Ideas LLC identified

Stone Energy

(

SGY

) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Stone Energy as such a stock due to the following factors:

  • SGY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $9.1 million.
  • SGY has traded 158,859 shares today.
  • SGY is trading at 3.07 times the normal volume for the stock at this time of day.
  • SGY is trading at a new low 3.05% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. 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 (or avoid losses by trimming weak positions). 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.

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More details on SGY:

Stone Energy Corporation, an independent oil and natural gas company, engages in the acquisition, exploration, exploitation, development, and operation of oil and gas properties in the Gulf of Mexico and the Appalachia region. Currently there are 5 analysts that rate Stone Energy a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Stone Energy has been 1.1 million shares per day over the past 30 days. Stone Energy has a market cap of $431.8 million and is part of the basic materials sector and energy industry. The stock has a beta of 1.97 and a short float of 25.2% with 7.26 days to cover. Shares are down 59.2% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Stone Energy as a

sell

. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally high debt management risk and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 1362.0% when compared to the same quarter one year ago, falling from $25.94 million to -$327.39 million.
  • 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, STONE ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $83.52 million or 27.66% when compared to the same quarter last year. Despite a decrease in cash flow STONE ENERGY CORP is still fairing well by exceeding its industry average cash flow growth rate of -53.49%.
  • The debt-to-equity ratio of 1.37 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, SGY's quick ratio is somewhat strong at 1.14, demonstrating the ability to handle short-term liquidity needs.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 79.00%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1240.38% compared to the year-earlier 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.

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