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"We rate HALCON RESOURCES CORP (HK) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 2.33 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, HK has a quick ratio of 0.59, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- HK'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 37.09%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength 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.
- HALCON RESOURCES CORP reported significant earnings per share improvement in the most recent quarter compared to 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, HALCON RESOURCES CORP reported poor results of -$3.11 versus -$1.24 in the prior year. This year, the market expects an improvement in earnings ($0.18 versus -$3.11).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 123.1% when compared to the same quarter one year prior, rising from -$854.83 million to $197.64 million.
- You can view the full analysis from the report here: HK Ratings Report