Nuverra Environmental Solutions (NES): Today's Weak On High 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 Nuverra Environmental Solutions ( NES) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Nuverra Environmental Solutions as such a stock due to the following factors:

  • NES has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.0 million.
  • NES has traded 132,103 shares today.
  • NES is trading at 8.10 times the normal volume for the stock at this time of day.
  • NES is trading at a new low 6.11% 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 NES:

Nuverra Environmental Solutions, Inc. provides full-cycle environmental solutions to customers focused on the development and ongoing production of oil and natural gas from shale formations in the United States. Currently there are 2 analysts that rate Nuverra Environmental Solutions a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Nuverra Environmental Solutions has been 417,600 shares per day over the past 30 days. Nuverra has a market cap of $175.6 million and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 1.27 and a short float of 36.1% with 9.24 days to cover. Shares are down 66.2% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Nuverra Environmental Solutions 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:
  • The debt-to-equity ratio of 1.18 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, NES maintains a poor quick ratio of 0.91, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, NUVERRA ENVIRONMENTAL SOLUTN'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 $18.70 million or 53.13% 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 NUVERRA ENVIRONMENTAL SOLUTN is currently lower than what is desirable, coming in at 30.51%. Regardless of NES's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NES's net profit margin of -103.82% significantly underperformed when compared to the industry average.
  • NES'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 59.48%, 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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