Poor fundamentals keeping Targa Resources down
Oil and gas exploration company Targa Resources (NYSE: TRGP) has been trending lower for almost a year now, falling from a high of $54.40 to a recent low of $32.00. The stock is below its 13-week moving average as well as the 52-week and the 104-week.
While the weekly chart shows how the stock has been declining, it is the fundamentals that seem to be driving the stock lower. The company has lost money in each of the last eight quarters and earnings and sales both declined in the second quarter. Earnings fell by 150% and sales were down 18%.
As a result of the poor earnings and sales performance, the company has a negative return on equity and the profit margin is a paltry 0.6%. As a result of these numbers, the Tickeron SMR rating for Targa Resources is 97, indicating weak sales and an unprofitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The best companies have an SMR rating of 1 and the worst SMR rating possible is 100.
The Tickeron Profit vs. Risk Rating for the company is 100, indicating that the returns do not compensate for the risks. Targa’s unstable profits reported over time resulted in significant drawdowns within the last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating for the industry is 87, placing this stock worse than average.
The Tickeron Valuation Rating of 83 indicates that the company is slightly overvalued in the industry. A rating of 1 points to the most undervalued stocks, while a rating of 100 points to the most overvalued stocks. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. One of the biggest factors in this rating is the P/E ratio of 40.22 while the industry average is only 22.92.
Turning our attention back to the technical analysis, the daily chart shows that the stock is overbought based on the daily stochastic readings. The indicators did make a bearish crossover on September 5 and that could be a bearish sign for the stock.
We also see that the candlestick for September 5 is an inverted hammer or a shooting star formation. This indicates that the stock gapped higher on the open, moved even higher during the day, but then fell back to close near the opening price. The significance of this formation is that it shows bulls in control at the open and during the day, but bears appeared to take control heading in to the close.
We also see that the 10-day moving average for this Targa crossed below its 50-day moving average on August 05, 2019. This can be construed as a sell signal, indicating that the trend is shifting lower. In 10 of 14 cases where Targa’s 10-day moving average crossed below its 50-day moving average, its price fell further within the subsequent month. The odds of a continued downtrend are 71%.
The Tickeron Trend Prediction Engine generated a bearish signal for Targa on September 3 with a confidence level of 65%. The signal calls for a drop of at least 4% within the next month. Past predictions on Targa have been successful 72% of the time.
Looking at the sentiment indicators for Targa, we see some pessimism. There are 22 analysts following the stock with 16 “buy” ratings and six “hold” ratings. That puts the buy percentage at 72.7% which is in the average range. However, when you take in to account the poor stock performance and the poor fundamentals, you would think analysts would be more pessimistic than they are on the average stock.
The short interest ratio does indicate that there are some skeptics. The current reading is at 7.5 and that is well above the average short interest ratio.
TRGP's Stochastic Oscillator is remaining in oversold zone for 1 day
Be on the lookout for a price bounce soon.
Technical Analysis (Indicators)
Bullish Trend Analysis
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where TRGP advanced for three days, in of 340 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 356 cases where TRGP Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Bearish Trend Analysis
The 10-day RSI Indicator for TRGP moved out of overbought territory on April 12, 2024. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 40 similar instances where the indicator moved out of overbought territory. In of the 40 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
The Momentum Indicator moved below the 0 level on April 17, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on TRGP as a result. In of 91 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for TRGP turned negative on April 08, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 50 similar instances when the indicator turned negative. In of the 50 cases the stock turned lower in the days that followed. This puts the odds of success at .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where TRGP declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
TRGP broke above its upper Bollinger Band on April 03, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Fundamental Analysis (Ratings)
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating outstanding price growth. TRGP’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 58, placing this stock better than average.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is fair valued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (9.116) is normal, around the industry mean (44.070). P/E Ratio (30.664) is within average values for comparable stocks, (16.201). Projected Growth (PEG Ratio) (1.274) is also within normal values, averaging (2.696). TRGP has a moderately low Dividend Yield (0.018) as compared to the industry average of (0.064). P/S Ratio (1.579) is also within normal values, averaging (2.923).
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is slightly overvalued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
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Fundamental Analysis Ratings
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General Information
a provider of midstream natural gas and natural gas liquid services
Industry OilGasPipelines