Today's Weak On High Volume Stock: Gastar Exploration (GST)

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

  • GST has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $2.8 million.
  • GST has traded 173,470 shares today.
  • GST is trading at 3.42 times the normal volume for the stock at this time of day.
  • GST is trading at a new low 6.03% 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 GST:

Gastar Exploration Inc., an independent energy company, engages in the exploration, development, and production of oil, condensate, natural gas, and natural gas liquids in the United States. GST has a PE ratio of 6. Currently there are 7 analysts that rate Gastar Exploration a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Gastar Exploration has been 819,900 shares per day over the past 30 days. Gastar has a market cap of $280.8 million and is part of the basic materials sector and energy industry. The stock has a beta of 3.90 and a short float of 6.3% with 4.58 days to cover. Shares are up 49% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

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

Highlights from the ratings report include:
  • GASTAR EXPLORATION INC's earnings per share declined by 33.3% in the most recent quarter compared to the same quarter a year ago. For the next year, the market is expecting a contraction of 135.7% in earnings (-$0.18 versus $0.49).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 61.9% when compared to the same quarter one year ago, falling from $1.61 million to $0.61 million.
  • The debt-to-equity ratio of 1.10 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, GST has a quick ratio of 0.60, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • 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. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, GASTAR EXPLORATION INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for GASTAR EXPLORATION INC is currently very high, coming in at 78.60%. Regardless of GST's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.78% trails the industry average.

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