Trade-Ideas: Key Energy Services (KEG) Is Today's "Dead Cat Bounce" Stock - TheStreet

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

Key Energy Services

(

KEG

) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Key Energy Services as such a stock due to the following factors:

  • KEG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $14.5 million.
  • KEG has traded 108,639 shares today.
  • KEG is up 3.1% today.
  • KEG was down 5% yesterday.

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More details on KEG:

Key Energy Services, Inc. operates as an onshore rig-based well servicing contractor in the United States and internationally. The company operates in U.S. and International segments. Currently there are 5 analysts that rate Key Energy Services a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Key Energy Services has been 2.5 million shares per day over the past 30 days. Key Energy Services has a market cap of $518.9 million and is part of the basic materials sector and energy industry. The stock has a beta of 2.57 and a short float of 4.4% with 1.33 days to cover. Shares are down 59.4% year-to-date as of the close of trading on Tuesday.

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

TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Key Energy Services 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, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:

  • KEY ENERGY SERVICES INC 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, KEY ENERGY SERVICES INC swung to a loss, reporting -$0.14 versus $0.68 in the prior year. For the next year, the market is expecting a contraction of 157.1% in earnings (-$0.36 versus -$0.14).
  • 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 Energy Equipment & Services industry. The net income has significantly decreased by 1164.4% when compared to the same quarter one year ago, falling from -$4.13 million to -$52.20 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market, KEY ENERGY SERVICES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for KEY ENERGY SERVICES INC is currently lower than what is desirable, coming in at 25.06%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -14.88% is significantly below that of the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 48.56%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1033.33% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

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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