Trade-Ideas: SM Energy (SM) 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.

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

  • SM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $83.8 million.
  • SM has traded 265,464 shares today.
  • SM is trading at 5.47 times the normal volume for the stock at this time of day.
  • SM is trading at a new low 3.01% 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.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in SM with the Ticky from Trade-Ideas. See the FREE profile for SM NOW at Trade-Ideas

More details on SM:

SM Energy Company, an independent energy company, engages in the acquisition, exploration, development, and production of crude oil and condensate, natural gas, and natural gas liquids in onshore North America. The stock currently has a dividend yield of 0.2%. SM has a PE ratio of 5.9. Currently there are 10 analysts that rate SM Energy a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for SM Energy has been 1.6 million shares per day over the past 30 days. SM Energy has a market cap of $3.9 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.66 and a short float of 6.3% with 3.02 days to cover. Shares are up 49.5% year-to-date as of the close of trading on Tuesday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SM Energy as a hold. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and a generally disappointing performance in the stock itself.

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 4641.6% when compared to the same quarter one year prior, rising from $7.00 million to $331.73 million.
  • 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, SM ENERGY CO's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Despite the weak revenue results, SM has significantly outperformed against the industry average of 33.1%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • SM has underperformed the S&P 500 Index, declining 21.80% from its price level of one year ago. 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.
  • The debt-to-equity ratio of 1.03 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.41, which clearly demonstrates the inability to cover short-term cash needs.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.