Strong On High Volume: Goodrich Petroleum (GDP)

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

  • GDP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $10.3 million.
  • GDP has traded 630,178 shares today.
  • GDP is trading at 4.40 times the normal volume for the stock at this time of day.
  • GDP is trading at a new high 4.32% 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 GDP:

Goodrich Petroleum Corporation, an independent oil and natural gas company, engages in the exploration, development, and production of oil and natural gas. Currently there are 2 analysts that rate Goodrich Petroleum a buy, 1 analyst rates it a sell, and 11 rate it a hold.

The average volume for Goodrich Petroleum has been 3.0 million shares per day over the past 30 days. Goodrich has a market cap of $90.3 million and is part of the basic materials sector and energy industry. The stock has a beta of 4.01 and a short float of 30% with 2.71 days to cover. Shares are down 58.3% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Goodrich Petroleum as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 28.35 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 0.21, 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, GOODRICH PETROLEUM CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • GDP'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 93.86%, 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.
  • Net operating cash flow has decreased to $5.72 million or 12.78% when compared to the same quarter last year. Despite a decrease in cash flow GOODRICH PETROLEUM CORP is still fairing well by exceeding its industry average cash flow growth rate of -53.29%.
  • Along with the very weak revenue results, GDP underperformed when compared to the industry average of 38.7%. Since the same quarter one year prior, revenues plummeted by 53.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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