SM Energy (SM): Today's Weak On High 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 SM Energy ( SM) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified SM Energy as such a stock due to the following factors:

  • SM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $73.7 million.
  • SM has traded 95,739 shares today.
  • SM is trading at 2.11 times the normal volume for the stock at this time of day.
  • SM is trading at a new low 4.00% 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 SM:

SM Energy Company, an independent energy company, engages in the acquisition, exploration, development, and production of crude oil and condensate, natural gas, and natural gas liquids in onshore North America. The stock currently has a dividend yield of 0.2%. SM has a PE ratio of 7. Currently there are 10 analysts that rate SM Energy a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for SM Energy has been 1.6 million shares per day over the past 30 days. SM Energy has a market cap of $3.6 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.45 and a short float of 5.8% with 3.44 days to cover. Shares are up 33.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates SM Energy as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Oil, Gas & Consumable Fuels industry and the overall market on the basis of return on equity, SM ENERGY CO has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 38.6%. Since the same quarter one year prior, revenues fell by 36.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 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 180.9% when compared to the same quarter one year ago, falling from $65.61 million to -$53.06 million.
  • The debt-to-equity ratio of 1.17 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.39, which clearly demonstrates the inability to cover short-term cash needs.

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