Resolute Energy (REN) Highlighted As Weak On High Volume

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 Resolute Energy ( REN) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Resolute Energy as such a stock due to the following factors:

  • REN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.8 million.
  • REN has traded 131,218 shares today.
  • REN is trading at 7.24 times the normal volume for the stock at this time of day.
  • REN is trading at a new low 3.11% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on REN:

Resolute Energy Corporation, an independent oil and gas company, acquires, explores for, develops, and produces oil, gas, and hydrocarbon liquids. Currently there are 6 analysts that rate Resolute Energy a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Resolute Energy has been 558,800 shares per day over the past 30 days. Resolute Energy has a market cap of $567.8 million and is part of the basic materials sector and energy industry. The stock has a beta of 1.97 and a short float of 17.8% with 16.84 days to cover. Shares are down 21.6% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Resolute Energy 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 278.6% when compared to the same quarter one year ago, falling from $9.02 million to -$16.12 million.
  • The debt-to-equity ratio of 1.42 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.48, 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, RESOLUTE ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $29.08 million or 19.51% 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.
  • The share price of RESOLUTE ENERGY CORP has not done very well: it is down 16.98% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.

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