Trade-Ideas: Ensco (ESV) Is Today's Strong 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 Ensco ( ESV) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Ensco as such a stock due to the following factors:

  • ESV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $111.3 million.
  • ESV has traded 560,844 shares today.
  • ESV is trading at 2.22 times the normal volume for the stock at this time of day.
  • ESV is trading at a new high 4.02% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 ESV:

Ensco plc provides offshore contract drilling services to the oil and gas industry worldwide. The company operates through three segments: Floaters, Jackups, and Other. The stock currently has a dividend yield of 2.5%. Currently there are no analysts that rate Ensco a buy, 5 analysts rate it a sell, and 10 rate it a hold.

The average volume for Ensco has been 5.9 million shares per day over the past 30 days. Ensco has a market cap of $5.5 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.28 and a short float of 8.8% with 4.05 days to cover. Shares are down 21.9% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Ensco as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • 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 Energy Equipment & Services industry and the overall market, ENSCO PLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • ESV'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 53.29%, 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.
  • ENSCO PLC has improved earnings per share by 9.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ENSCO PLC swung to a loss, reporting -$11.70 versus $6.08 in the prior year. This year, the market expects an improvement in earnings ($4.03 versus -$11.70).
  • ESV's debt-to-equity ratio of 0.72 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that ESV's debt-to-equity ratio is mixed in its results, the company's quick ratio of 2.14 is high and demonstrates strong liquidity.
  • Net operating cash flow has increased to $459.00 million or 10.17% when compared to the same quarter last year. Despite an increase in cash flow, ENSCO PLC's average is still marginally south of the industry average growth rate of 12.24%.

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