Southwestern Energy Company (SWN) Is Today's Roof Leaker Stock

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 Southwestern Energy Company ( SWN) 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 Southwestern Energy Company as such a stock due to the following factors:

  • SWN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $156.3 million.
  • SWN has traded 2.9 million shares today.
  • SWN is trading at 1.53 times the normal volume for the stock at this time of day.
  • SWN 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 SWN:

Southwestern Energy Company, an independent energy company, engages in the exploration, development, and production of natural gas and oil primarily in the United States. The company operates through two segments, Exploration and Production, and Midstream Services. Currently there are 6 analysts that rate Southwestern Energy Company a buy, 1 analyst rates it a sell, and 20 rate it a hold.

The average volume for Southwestern Energy Company has been 3.4 million shares per day over the past 30 days. Southwestern Energy has a market cap of $13.4 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.47 and a short float of 4.1% with 3.37 days to cover. Shares are up 14.3% year to date as of the close of trading on Monday.

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 Southwestern Energy Company as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, good cash flow from operations, expanding profit margins and impressive record of earnings per share growth. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.9%. Since the same quarter one year prior, revenues rose by 25.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 443.9% when compared to the same quarter one year prior, rising from -$54.05 million to $185.87 million.
  • Net operating cash flow has increased to $499.97 million or 40.80% when compared to the same quarter last year. In addition, SOUTHWESTERN ENERGY CO has also vastly surpassed the industry average cash flow growth rate of -12.83%.
  • The gross profit margin for SOUTHWESTERN ENERGY CO is rather high; currently it is at 59.21%. Regardless of SWN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SWN's net profit margin of 21.40% significantly outperformed against the industry.
  • SOUTHWESTERN ENERGY CO 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, SOUTHWESTERN ENERGY CO swung to a loss, reporting -$2.03 versus $1.82 in the prior year. This year, the market expects an improvement in earnings ($2.00 versus -$2.03).

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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