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

  • KEG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $4.5 million.
  • KEG has traded 560,855 shares today.
  • KEG is trading at 2.92 times the normal volume for the stock at this time of day.
  • KEG is trading at a new low 6.22% 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 KEG:

Key Energy Services, Inc. operates as an onshore rig-based well servicing contractor in the United States and internationally. Currently there are 4 analysts that rate Key Energy Services a buy, 1 analyst rates it a sell, and 9 rate it a hold.

The average volume for Key Energy Services has been 3.1 million shares per day over the past 30 days. Key Energy Services has a market cap of $319.7 million and is part of the basic materials sector and energy industry. The stock has a beta of 1.74 and a short float of 9.7% with 5.42 days to cover. Shares are up 20.4% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Key Energy Services as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.

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 Energy Equipment & Services industry. The net income has significantly decreased by 401.5% when compared to the same quarter one year ago, falling from -$11.90 million to -$59.68 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 Energy Equipment & Services industry and the overall market, KEY ENERGY SERVICES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for KEY ENERGY SERVICES INC is rather low; currently it is at 23.63%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -22.28% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$2.66 million or 105.83% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 75.07%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 387.50% 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.

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