Strong On High Volume: Pattern Energy Group (PEGI)

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 Pattern Energy Group ( PEGI) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Pattern Energy Group as such a stock due to the following factors:

  • PEGI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $28.7 million.
  • PEGI has traded 61,581 shares today.
  • PEGI is trading at 3.23 times the normal volume for the stock at this time of day.
  • PEGI is trading at a new high 3.01% 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 PEGI:

Pattern Energy Group Inc., an independent power company, owns and operates power projects in the United States, Canada, and Chile. As of March 2, 2015, the company owned interests in 12 wind power projects with the capacity of 1,636 megawatts. It sells electricity primarily to local utilities. The stock currently has a dividend yield of 4.7%. Currently there are 8 analysts that rate Pattern Energy Group a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Pattern Energy Group has been 517,200 shares per day over the past 30 days. Pattern Energy Group has a market cap of $2.1 billion and is part of the utilities sector and utilities industry. Shares are up 21.4% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Pattern Energy Group as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 16.5%. Since the same quarter one year prior, revenues rose by 30.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to other companies in the Independent Power Producers & Energy Traders industry and the overall market on the basis of return on equity, PATTERN ENERGY GROUP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The gross profit margin for PATTERN ENERGY GROUP INC is rather high; currently it is at 61.08%. Regardless of PEGI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PEGI's net profit margin of -30.67% significantly underperformed when compared to the industry average.
  • Net operating cash flow has declined marginally to $16.24 million or 1.01% when compared to the same quarter last year. Despite a decrease in cash flow PATTERN ENERGY GROUP INC is still fairing well by exceeding its industry average cash flow growth rate of -23.66%.
  • In its most recent trading session, PEGI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

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