Strong On High Volume: Denbury Resources (DNR)

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 Denbury Resources ( DNR) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Denbury Resources as such a stock due to the following factors:

  • DNR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $147.0 million.
  • DNR has traded 1.4 million shares today.
  • DNR is trading at 3.13 times the normal volume for the stock at this time of day.
  • DNR is trading at a new high 4.10% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 DNR:

Denbury Resources Inc. operates as an oil and natural gas company in the United States. The company primarily focuses on enhanced oil recovery utilizing carbon dioxide. The stock currently has a dividend yield of 3.7%. DNR has a PE ratio of 6.7. Currently there are 3 analysts that rate Denbury Resources a buy, no analysts rate it a sell, and 11 rate it a hold.

The average volume for Denbury Resources has been 10.4 million shares per day over the past 30 days. Denbury has a market cap of $2.4 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.57 and a short float of 7.7% with 1.38 days to cover. Shares are down 56.4% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Denbury Resources as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • 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 163.3% when compared to the same quarter one year prior, rising from $102.05 million to $268.75 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.67, 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 DNR's debt-to-equity ratio is low, the quick ratio, which is currently 0.66, displays a potential problem in covering short-term cash needs.
  • DNR'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 58.73%, 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 has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, DENBURY RESOURCES INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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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