Devon Energy (DVN) Falls Further As It's Water-Logged And Getting Wetter

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 Devon Energy ( DVN) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Devon Energy as such a stock due to the following factors:

  • DVN has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $232.7 million.
  • DVN has traded 2.7 million shares today.
  • DVN traded in a range 215.1% of the normal price range with a price range of $3.12.
  • DVN traded below its daily resistance level (quality: 5 days, meaning that the stock is crossing a resistance level set by the last 5 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on DVN:

Devon Energy Corporation, an independent energy company, primarily engages in the exploration, development, and production of oil, natural gas, and natural gas liquids (NGLs) in the United States and Canada. The stock currently has a dividend yield of 1.4%. DVN has a PE ratio of 17.6. Currently there are 13 analysts that rate Devon Energy a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Devon Energy has been 3.7 million shares per day over the past 30 days. Devon Energy has a market cap of $28.2 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 1.4% with 1.96 days to cover. Shares are up 12.1% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Devon Energy as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • DVN's very impressive revenue growth greatly exceeded the industry average of 33.1%. Since the same quarter one year prior, revenues leaped by 128.5%. 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.
  • The current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that DVN's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.
  • In its most recent trading session, DVN has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 297.1% when compared to the same quarter one year ago, falling from $207.00 million to -$408.00 million.

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