One Reason Magnum Hunter Resources (MHR) Stock is Plunging Today

NEW YORK (TheStreet) -- Shares of Magnum Hunter Resources (MHR) are down by 10% to $1.39 in mid-afternoon trading on Thursday, as some energy and related stocks take a hit due to the decline in oil prices.

A stronger dollar is pushing the prices of commodities lower today. Oil is also being affected by concerns over a continuing global supply glut, The Wall Street Journal reports.

Crude oil (WTI) is slipping by 1.11% to $60.75 per barrel and Brent crude is down by 0.93% to $65.09 per barrel this afternoon, according to the index provided by CNBC.com.

The dollar is up by 0.42%, according to The Journal's dollar index.

In its monthly report the International Energy Agency said that global oil supplies will continue to exceed demand this year, The Journal noted.

Additionally, on Wednesday Magnum Hunter received a ratings downgrade to "underperform" from "in-line" at Imperial Capital.

The firm said it lowered its rating on the company after Magnum Hunter announced that its proceeds from the sale of its West Virginia non-core unit would be less than it had previously anticipated.

Separately, TheStreet Ratings team rates MAGNUM HUNTER RESOURCES CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate MAGNUM HUNTER RESOURCES CORP (MHR) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 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 72.0% when compared to the same quarter one year ago, falling from -$61.59 million to -$105.92 million.
  • The debt-to-equity ratio is very high at 2.22 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.20, which clearly demonstrates the inability to cover short-term cash 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. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MAGNUM HUNTER RESOURCES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 79.86%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 39.02% 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.
  • MAGNUM HUNTER RESOURCES CORP's earnings per share declined by 39.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MAGNUM HUNTER RESOURCES CORP continued to lose money by earning -$1.29 versus -$1.69 in the prior year. For the next year, the market is expecting a contraction of 6.6% in earnings (-$1.38 versus -$1.29).
  • You can view the full analysis from the report here: MHR Ratings Report

More from Markets

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Jim Cramer: The 10-Year Yield Could Go to 2.75%

Jim Cramer: The 10-Year Yield Could Go to 2.75%

Oil Slumps, Gas Spikes Ahead of Holiday Weekend; Assessing the Chipmakers--ICYMI

Oil Slumps, Gas Spikes Ahead of Holiday Weekend; Assessing the Chipmakers--ICYMI

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Week Ahead: Wall Street Looks to Jobs Report as North Korea Meeting Less Certain

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%

Dow and S&P 500 Decline, Energy Shares Fall as U.S. Crude Oil Slides 4%