Trade-Ideas: Kosmos Energy (KOS) Is Today's Weak On High Relative Volume Stock

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 Kosmos Energy ( KOS) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Kosmos Energy as such a stock due to the following factors:

  • KOS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $23.4 million.
  • KOS has traded 149,196 shares today.
  • KOS is trading at 2.90 times the normal volume for the stock at this time of day.
  • KOS is trading at a new low 3.11% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of 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 (or avoid losses by trimming weak positions). 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 KOS:

Kosmos Energy Ltd. explores and produces oil and gas in Africa, Europe, and South America. Its asset portfolio includes production and other projects offshore Ghana, as well as exploration licenses with hydrocarbon potential offshore Ireland, Mauritania, Morocco, and Suriname. KOS has a PE ratio of 20.8. Currently there are 3 analysts that rate Kosmos Energy a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Kosmos Energy has been 2.2 million shares per day over the past 30 days. Kosmos Energy has a market cap of $3.2 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.44 and a short float of 6.7% with 2.47 days to cover. Shares are down 27.8% year-to-date as of the close of trading on Monday.

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 Kosmos Energy as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

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 143.0% when compared to the same quarter one year prior, rising from -$44.49 million to $19.12 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. Along with this, the company maintains a quick ratio of 2.60, which clearly demonstrates the ability to cover short-term cash needs.
  • KOSMOS ENERGY LTD 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, KOSMOS ENERGY LTD reported poor results of -$0.25 versus -$0.19 in the prior year. This year, the market expects an improvement in earnings ($0.30 versus -$0.25).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, KOSMOS ENERGY LTD's return on equity is below that of both the industry average and the S&P 500.
  • KOS'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 25.05%, 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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