Halcon Resources (HK) Marked As A Barbarian At The Gate

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 Halcon Resources ( HK) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Halcon Resources as such a stock due to the following factors:

  • HK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $28.0 million.
  • HK has traded 4.5 million shares today.
  • HK traded in a range 232.9% of the normal price range with a price range of $0.52.
  • HK traded above its daily resistance level (quality: 160 days, meaning that the stock is crossing a resistance level set by the last 160 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on HK:

Halcon Resources Corporation, an independent energy company, is engaged in the acquisition, production, exploration, and development of onshore oil and natural gas properties in the United States. Currently there are 7 analysts that rate Halcon Resources a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for Halcon Resources has been 5.0 million shares per day over the past 30 days. Halcon has a market cap of $1.9 billion and is part of the basic materials sector and energy industry. Shares are up 17.9% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Halcon Resources as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow 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 5003.7% when compared to the same quarter one year ago, falling from -$8.04 million to -$410.39 million.
  • The debt-to-equity ratio is very high at 2.20 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.49, which clearly demonstrates the inability to cover short-term cash needs.
  • 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, HALCON RESOURCES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has declined marginally to $102.32 million or 2.18% when compared to the same quarter last year. Despite a decrease in cash flow HALCON RESOURCES CORP is still fairing well by exceeding its industry average cash flow growth rate of -23.28%.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 42.00%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 2425.00% 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.

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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