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

  • EOX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $10.6 million.
  • EOX has traded 266,319 shares today.
  • EOX is trading at 4.61 times the normal volume for the stock at this time of day.
  • EOX is trading at a new low 8.03% 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 EOX:

Emerald Oil, Inc. operates as an independent oil and natural gas exploration and production company in the United States. The company designs, drills, and operates oil and natural gas wells. Currently there is 1 analyst that rates Emerald Oil a buy, 1 analyst rates it a sell, and 4 rate it a hold.

The average volume for Emerald Oil has been 2.2 million shares per day over the past 30 days. Emerald Oil has a market cap of $59.9 million and is part of the basic materials sector and energy industry. Shares are down 97.8% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

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

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 5815.3% when compared to the same quarter one year ago, falling from -$1.65 million to -$97.66 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, EMERALD OIL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Even though the current debt-to-equity ratio is 1.02, it is still below the industry average, suggesting that this level of debt is acceptable within the Oil, Gas & Consumable Fuels industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.42 is very low and demonstrates very weak liquidity.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 94.85%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 5100.00% 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.
  • Despite the weak revenue results, EOX has outperformed against the industry average of 38.5%. Since the same quarter one year prior, revenues fell by 19.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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