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

  • PWE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $16.8 million.
  • PWE has traded 1.8 million shares today.
  • PWE is down 3% today.
  • PWE was up 8.7% yesterday.

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More details on PWE:

Penn West Petroleum Ltd., an exploration and production company, acquires, explores, develops, exploits, and holds interests in petroleum and natural gas properties and related assets in western Canada. The stock currently has a dividend yield of 7.3%. Currently there is 1 analyst that rates Penn West Petroleum a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Penn West Petroleum has been 2.1 million shares per day over the past 30 days. Penn West has a market cap of $3.5 billion and is part of the basic materials sector and energy industry. Shares are down 13.8% year-to-date as of the close of trading on Tuesday.

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 Penn West Petroleum as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow, feeble growth in its earnings per share and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • 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, PENN WEST PETROLEUM LTD'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 $232.00 million or 9.37% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, PENN WEST PETROLEUM LTD has marginally lower results.
  • PENN WEST PETROLEUM LTD reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, PENN WEST PETROLEUM LTD swung to a loss, reporting -$1.71 versus $0.37 in the prior year.
  • PWE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 38.29%, which is also worse than the performance of the S&P 500 Index. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.0%. Since the same quarter one year prior, revenues slightly dropped by 0.4%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.

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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