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.

Trade-Ideas LLC identified Energen ( EGN) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Energen as such a stock due to the following factors:

  • EGN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $51.4 million.
  • EGN has traded 811,287 shares today.
  • EGN is trading at 1.63 times the normal volume for the stock at this time of day.
  • EGN crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. 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 on. 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 EGN:

Energen Corporation, through its subsidiary Energen Resources Corporation, explores for, develops, and produces oil, natural gas, and natural gas liquids in the United States. The stock currently has a dividend yield of 0.1%. EGN has a PE ratio of 48.7. Currently there are 9 analysts that rate Energen a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Energen has been 959,900 shares per day over the past 30 days. Energen has a market cap of $4.9 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.25 and a short float of 3.8% with 3.28 days to cover. Shares are up 5.8% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Energen as a hold. The company's strengths can be seen in multiple areas, such as its expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • The gross profit margin for ENERGEN CORP is rather high; currently it is at 54.33%. Regardless of EGN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EGN's net profit margin of 22.81% significantly outperformed against the industry.
  • The current debt-to-equity ratio, 0.30, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.28 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 19.6%. Since the same quarter one year prior, revenues fell by 12.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ENERGEN 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 -$3.81 million or 101.90% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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