MarkWest Energy Partners (MWE) Showing Signs Of Being A Roof Leaker

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 MarkWest Energy Partners ( MWE) 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 MarkWest Energy Partners as such a stock due to the following factors:

  • MWE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $92.6 million.
  • MWE has traded 66,532 shares today.
  • MWE is trading at 3.14 times the normal volume for the stock at this time of day.
  • MWE 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 MWE:

MarkWest Energy Partners, L.P. is engaged in the gathering, processing, and transportation of natural gas. The company is also engaged in the gathering, transportation, fractionation, storage, and marketing of natural gas liquids; and the gathering and transportation of crude oil. The stock currently has a dividend yield of 5.1%. MWE has a PE ratio of 142.7. Currently there are 4 analysts that rate MarkWest Energy Partners a buy, no analysts rate it a sell, and 8 rate it a hold.

The average volume for MarkWest Energy Partners has been 1.3 million shares per day over the past 30 days. MarkWest Energy has a market cap of $12.9 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.12 and a short float of 1% with 1.23 days to cover. Shares are up 6.9% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates MarkWest Energy Partners as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 6.3%. Since the same quarter one year prior, revenues rose by 44.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 47.63% is the gross profit margin for MARKWEST ENERGY PARTNERS LP which we consider to be strong. It has increased significantly from the same period last year. Along with this, the net profit margin of 12.75% is above that of the industry average.
  • 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 428.1% when compared to the same quarter one year prior, rising from -$23.60 million to $77.43 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.74, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that MWE's debt-to-equity ratio is low, the quick ratio, which is currently 0.57, displays a potential problem in covering short-term cash needs.
  • MARKWEST ENERGY PARTNERS LP 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, MARKWEST ENERGY PARTNERS LP reported lower earnings of $0.21 versus $1.70 in the prior year. This year, the market expects an improvement in earnings ($0.86 versus $0.21).

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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