Perilous Reversal Watch: Laredo Petroleum (LPI)

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

  • LPI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $58.1 million.
  • LPI has traded 78,872 shares today.
  • LPI is down 4% today.
  • LPI was up 12% yesterday.

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More details on LPI:

Laredo Petroleum, Inc. operates as an independent energy company in the United States. It focuses on the exploration, development, and acquisition of oil and natural gas properties primarily in the Permian region of west Texas. LPI has a PE ratio of 9.3. Currently there are 11 analysts that rate Laredo Petroleum a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Laredo Petroleum has been 4.1 million shares per day over the past 30 days. Laredo has a market cap of $1.3 billion and is part of the basic materials sector and energy industry. The stock has a beta of 0.73 and a short float of 14.3% with 2.13 days to cover. Shares are down 67.8% year-to-date as of the close of trading on Thursday.

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 Laredo Petroleum as a sell. 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.

Highlights from the ratings report include:
  • The debt-to-equity ratio of 1.16 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, LPI has a quick ratio of 0.50, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • LPI'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 65.35%, 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. 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.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, LAREDO PETROLEUM INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for LAREDO PETROLEUM INC is currently very high, coming in at 80.22%. Regardless of LPI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LPI's net profit margin of 41.65% significantly outperformed against the industry.
  • Net operating cash flow has increased to $136.24 million or 40.23% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -1.90%.

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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