Magnum Hunter Resources (MHR) Stock Retreating Today as Oil Prices Fall

NEW YORK (TheStreet) --Shares of Magnum Hunter Resources Corp. (MHR) are down by 8.55% to $3.10 in mid-afternoon trading on Thursday, as energy stocks start to reverse yesterday's gains due to the decline in oil prices.

Crude oil for January delivery is down by 3.35% to $54.58 per barrel this afternoon on the NYMEX. Oil prices began the day on the plus side, helped in part by yesterday's data release from the Energy Information Administration, which showed a decline in crude inventories by 800,000 barrels.

The oil rally came after it a five year low of $58.50 per barrel earlier this week, Reuters reports.

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Oil prices are down almost 50% since June, the Wall Street Journal reports, due to a global oversupply and weak demand.

Separately, TheStreet Ratings team rates MAGNUM HUNTER RESOURCES CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate MAGNUM HUNTER RESOURCES CORP (MHR) a SELL. This is driven by some concerns, 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, disappointing return on equity, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Currently the debt-to-equity ratio of 1.58 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with this, the company manages to maintain a quick ratio of 0.36, which clearly demonstrates the inability to cover short-term cash needs.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, MAGNUM HUNTER RESOURCES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$5.19 million or 197.42% 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 gross profit margin for MAGNUM HUNTER RESOURCES CORP is rather low; currently it is at 21.75%. Regardless of MHR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, MHR's net profit margin of -151.47% significantly underperformed when compared to the industry average.
  • MHR'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 43.28%, 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.
  • You can view the full analysis from the report here: MHR Ratings Report

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