Perilous Reversal Watch: Hornbeck Offshore Services (HOS)

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

  • HOS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $40.8 million.
  • HOS has traded 97,956 shares today.
  • HOS is down 3.4% today.
  • HOS was up 12% yesterday.

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More details on HOS:

Hornbeck Offshore Services, Inc., through its subsidiaries, operates offshore supply vessels (OSVs) and multi-purpose support vessels (MPSVs) in the U.S. Gulf of Mexico, Latin America, and internationally. HOS has a PE ratio of 8.5. Currently there are 3 analysts that rate Hornbeck Offshore Services a buy, 1 analyst rates it a sell, and 1 rates it a hold.

The average volume for Hornbeck Offshore Services has been 1.1 million shares per day over the past 30 days. Hornbeck Offshore Services has a market cap of $728.7 million and is part of the basic materials sector and energy industry. The stock has a beta of 1.53 and a short float of 19.6% with 4.49 days to cover. Shares are down 18.3% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Hornbeck Offshore Services as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 2.6%. Since the same quarter one year prior, revenues rose by 10.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • HOS's debt-to-equity ratio of 0.78 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.81 is very high and demonstrates very strong liquidity.
  • HORNBECK OFFSHORE SVCS INC's earnings per share declined by 14.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, HORNBECK OFFSHORE SVCS INC increased its bottom line by earning $2.40 versus $1.76 in the prior year. For the next year, the market is expecting a contraction of 48.3% in earnings ($1.24 versus $2.40).
  • Looking at the price performance of HOS's shares over the past 12 months, there is not much good news to report: the stock is down 47.87%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier 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.

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