Goodrich Petroleum (GDP) In A Perilous Reversal

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

  • GDP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $30.3 million.
  • GDP has traded 117,863 shares today.
  • GDP is down 3% today.
  • GDP was up 8.8% yesterday.

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More details on GDP:

Goodrich Petroleum Corporation, an independent oil and natural gas company, is engaged in the exploration, development, and production of oil and natural gas. Currently there are 11 analysts that rate Goodrich Petroleum a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Goodrich Petroleum has been 2.1 million shares per day over the past 30 days. Goodrich has a market cap of $630.9 million and is part of the basic materials sector and energy industry. The stock has a beta of 2.24 and a short float of 42.9% with 6.43 days to cover. Shares are down 8.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Goodrich Petroleum as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio of 1.36 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, GDP maintains a poor quick ratio of 0.80, which illustrates the inability to avoid short-term cash problems.
  • Net operating cash flow has significantly decreased to $30.56 million or 59.89% 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.
  • In its most recent trading session, GDP has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GOODRICH PETROLEUM CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for GOODRICH PETROLEUM CORP is currently very high, coming in at 77.00%. Regardless of GDP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, GDP's net profit margin of -46.46% significantly underperformed when compared to the industry average.

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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