Today's Water-Logged And Getting Wetter Stock: Sanchez Energy (SN)

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 Sanchez Energy ( SN) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) 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 $39.1 million.
  • SN has traded 1.4 million shares today.
  • SN traded in a range 253.3% of the normal price range with a price range of $3.07.
  • SN traded below its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on SN:

Sanchez Energy Corporation, an independent exploration and production company, focuses on the acquisition, exploration, and development of unconventional oil and natural gas resources. Currently there are 11 analysts that rate Sanchez Energy a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Sanchez Energy has been 803,600 shares per day over the past 30 days. Sanchez Energy has a market cap of $1.5 billion and is part of the basic materials sector and energy industry. The stock has a beta of 0.55 and a short float of 30.9% with 6.72 days to cover. Shares are up 30.5% year-to-date as of the close of trading on Friday.

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 Sanchez Energy as a sell. Among the areas we feel are negative, one of the most important has been the company's poor growth in earnings per share.

Highlights from the ratings report include:
  • SANCHEZ ENERGY CORP 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SANCHEZ ENERGY CORP swung to a loss, reporting -$0.55 versus $0.02 in the prior year. This year, the market expects an improvement in earnings ($1.02 versus -$0.55).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SANCHEZ ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for SANCHEZ ENERGY CORP is currently very high, coming in at 82.42%. Regardless of SN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 4.11% trails the industry average.
  • SN's debt-to-equity ratio of 0.70 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.46 is very high and demonstrates very strong liquidity.
  • Compared to its closing price of one year ago, SN's share price has jumped by 59.71%, exceeding the performance of the broader market during that same time frame. Regarding the future course of this stock, we feel that the risks involved in investing in SN do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

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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