Stone Energy (SGY) Showing Signs Of A Dead Cat Bounce Today

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 Stone Energy ( SGY) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Stone Energy as such a stock due to the following factors:

  • SGY has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $24.5 million.
  • SGY has traded 280,608 shares today.
  • SGY is up 3.1% today.
  • SGY was down 5.3% yesterday.

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More details on SGY:

Stone Energy Corporation, an independent oil and natural gas company, engages in the acquisition, exploration, exploitation, development, and operation of oil and gas properties in the Gulf of Mexico and the Appalachia region. Currently there are 4 analysts that rate Stone Energy a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Stone Energy has been 1.2 million shares per day over the past 30 days. Stone Energy has a market cap of $935.2 million and is part of the basic materials sector and energy industry. The stock has a beta of 2.00 and a short float of 19% with 5.04 days to cover. Shares are down 3.1% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Stone Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • 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 1362.0% when compared to the same quarter one year ago, falling from $25.94 million to -$327.39 million.
  • 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 Oil, Gas & Consumable Fuels industry and the overall market, STONE ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio of 1.37 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, SGY's quick ratio is somewhat strong at 1.14, demonstrating the ability to handle short-term liquidity needs.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 66.39%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1240.38% compared to the year-earlier 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.
  • STONE ENERGY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, STONE ENERGY CORP swung to a loss, reporting -$3.41 versus $2.36 in the prior year. This year, the market expects an improvement in earnings (-$0.44 versus -$3.41).

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