Perilous Reversal Watch: Magnum Hunter Resources Corporation (MHR)

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

  • MHR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $29.3 million.
  • MHR has traded 106,872 shares today.
  • MHR is down 4.5% today.
  • MHR was up 10.5% yesterday.

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More details on MHR:

Magnum Hunter Resources Corporation, an independent oil and natural gas company, explores for, exploits, acquires, develops, and produces crude oil, natural gas, and natural gas liquid resources in the United States. Currently there are 9 analysts that rate Magnum Hunter Resources Corporation a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Magnum Hunter Resources Corporation has been 7.2 million shares per day over the past 30 days. Magnum Hunter has a market cap of $677.7 million and is part of the basic materials sector and energy industry. The stock has a beta of 1.89 and a short float of 24.7% with 4.55 days to cover. Shares are down 55.8% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Magnum Hunter Resources Corporation as a sell. 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 ratings report include:
  • 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 50.24%, 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.

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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