Callon Petroleum (CPE): Today's Weak On High 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 Callon Petroleum ( CPE) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Callon Petroleum as such a stock due to the following factors:

  • CPE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $16.2 million.
  • CPE has traded 212,166 shares today.
  • CPE is trading at 2.54 times the normal volume for the stock at this time of day.
  • CPE is trading at a new low 3.04% 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.

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More details on CPE:

Callon Petroleum Company engages in the exploration, development, acquisition, and production of oil and natural gas properties in the Permian Basin in West Texas. CPE has a PE ratio of 12.5. Currently there are 9 analysts that rate Callon Petroleum a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Callon Petroleum has been 2.1 million shares per day over the past 30 days. Callon has a market cap of $534.7 million and is part of the basic materials sector and energy industry. The stock has a beta of 2.02 and a short float of 8.7% with 2.43 days to cover. Shares are up 48.8% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Callon Petroleum as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 33.1%. Since the same quarter one year prior, revenues rose by 45.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for CALLON PETROLEUM CO/DE is currently very high, coming in at 73.83%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 49.35% significantly outperformed against the industry average.
  • The debt-to-equity ratio is somewhat low, currently at 0.77, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.32 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CALLON PETROLEUM CO/DE's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • In its most recent trading session, CPE 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.

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