Weak On High Volume: Magnum Hunter Resources Corporation (MHR)

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 Magnum Hunter Resources Corporation ( MHR) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Magnum Hunter Resources Corporation as such a stock due to the following factors:

  • MHR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $8.8 million.
  • MHR has traded 423,365 shares today.
  • MHR is trading at 2.26 times the normal volume for the stock at this time of day.
  • MHR is trading at a new low 5.03% 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 MHR:

Magnum Hunter Resources Corporation, an independent oil and gas company, explores for, exploits, acquires, develops, and produces crude oil, natural gas, and natural gas liquid resources in the United States. The company operates through the U.S. Currently there are 7 analysts that rate Magnum Hunter Resources Corporation a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Magnum Hunter Resources Corporation has been 4.7 million shares per day over the past 30 days. Magnum Hunter has a market cap of $391.0 million and is part of the basic materials sector and energy industry. The stock has a beta of 2.83 and a short float of 29.6% with 9.01 days to cover. Shares are down 38.2% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Magnum Hunter Resources Corporation as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Currently the debt-to-equity ratio of 1.78 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, MHR has a quick ratio of 0.58, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MAGNUM HUNTER RESOURCES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$32.22 million or 199.09% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • MHR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 74.24%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • MHR, with its decline in revenue, slightly underperformed the industry average of 33.1%. Since the same quarter one year prior, revenues fell by 33.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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