Laredo Petroleum (LPI) Is Today's Dead Cat Bounce 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 Laredo Petroleum ( LPI) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Laredo Petroleum as such a stock due to the following factors:

  • LPI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $49.1 million.
  • LPI has traded 1.8 million shares today.
  • LPI is up 3% today.
  • LPI was down 6.2% yesterday.

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More details on LPI:

Laredo Petroleum, Inc. operates as an independent energy company in the United States. It focuses on the acquisition, exploration, and development of oil and natural gas properties primarily in the Permian Basin in west Texas. LPI has a PE ratio of 8. Currently there are 8 analysts that rate Laredo Petroleum a buy, 1 analyst rates it a sell, and 8 rate it a hold.

The average volume for Laredo Petroleum has been 4.9 million shares per day over the past 30 days. Laredo has a market cap of $3.0 billion and is part of the basic materials sector and energy industry. The stock has a beta of 0.92 and a short float of 18.9% with 7.55 days to cover. Shares are up 26.7% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Laredo Petroleum as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and weak operating cash flow.

Highlights from the ratings report include:
  • The debt-to-equity ratio is somewhat low, currently at 0.80, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.74 is somewhat weak and could be cause for future problems.
  • 49.64% is the gross profit margin for LAREDO PETROLEUM INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.31% trails the industry average.
  • Net operating cash flow has significantly decreased to $26.87 million or 79.03% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • 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 121.6% when compared to the same quarter one year ago, falling from -$0.21 million to -$0.47 million.

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