Hercules Offshore (HERO) Showing Signs Of Perilous Reversal Today

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

  • HERO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $12.9 million.
  • HERO has traded 288,649 shares today.
  • HERO is down 4.2% today.
  • HERO was up 7.3% yesterday.

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More details on HERO:

Hercules Offshore, Inc., together with its subsidiaries, provides shallow-water drilling and marine services to the oil and natural gas exploration and production industry worldwide. The company operates through Domestic Offshore, International Offshore, and International Liftboats segments. Currently there are 4 analysts that rate Hercules Offshore a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Hercules Offshore has been 4.5 million shares per day over the past 30 days. Hercules has a market cap of $384.3 million and is part of the basic materials sector and energy industry. The stock has a beta of 2.43 and a short float of 9.5% with 4.67 days to cover. Shares are down 66.3% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Energy Equipment & Services industry and the overall market, HERCULES OFFSHORE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $24.33 million or 43.33% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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. Regardless of the company's weak debt-to-equity ratio, HERO has managed to keep a strong quick ratio of 1.81, which demonstrates the ability to cover short-term cash needs.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 66.76%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 60.00% 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.
  • HERCULES OFFSHORE INC 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. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HERCULES OFFSHORE INC continued to lose money by earning -$0.17 versus -$0.79 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus -$0.17).

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