Trade-Ideas: Energen (EGN) Is Today's

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 Energen ( EGN) 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 Energen as such a stock due to the following factors:

  • EGN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $65.4 million.
  • EGN has traded 549,511 shares today.
  • EGN is trading at 1.65 times the normal volume for the stock at this time of day.
  • EGN 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 EGN:

Energen Corporation is engaged in the development and exploration of oil, natural gas, and natural gas liquids in the continental United States. The stock currently has a dividend yield of 0.8%. EGN has a PE ratio of 50.8. Currently there are 8 analysts that rate Energen a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Energen has been 653,100 shares per day over the past 30 days. Energen has a market cap of $5.8 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.78 and a short float of 2.6% with 1.53 days to cover. Shares are up 16.7% 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 Energen as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • Compared to its closing price of one year ago, EGN's share price has jumped by 36.29%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.09 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The gross profit margin for ENERGEN CORP is rather high; currently it is at 52.29%. Regardless of EGN'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 -2.94% trails the industry average.
  • The revenue fell significantly faster than the industry average of 1.5%. Since the same quarter one year prior, revenues fell by 42.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • ENERGEN 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 suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ENERGEN CORP reported lower earnings of $2.66 versus $3.53 in the prior year. This year, the market expects an improvement in earnings ($3.04 versus $2.66).

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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