Monday, August 25, 2014

Fracking Material Producer and Supplier Bouncing- Hi-Crush Partners LP (HCLP)

Hi-Crush Partners LP (HCLP) advanced 343% since breaking out of a first stage cup and handle base on May 31, 2013 and is currently forming a late stage pullback to the fifty day moving average. Price volume has been positive with two shakeouts, August 1st and August 22nd, holding the fifty day moving average in heavy volume.

The companies sales and earnings are expected to grow 27 and 56% over the next three years, respectively, but that's slower then the current triple digit pace. Analyst have been revising estimates higher over the last ninety days despite the companies inconsistency in beating them. Margins have been decelerating for the last few quarters, year over year and quarter over quarter, and quarterly sales and earnings growth are expected to decelerate under 20% over the next six quarters. Return on equity has been north of 40% for the last two years. 

Considering the stock reached its pe expansion target already, the expected growth slow down over the next two years, and the late stage nature of the current base, this should only be considered for a quick trade, not an investment at this time. Based on current valuations and strong technicals, the stock could trade north of $80 (approximately 30% higher) and as high as $90 on a climactic move on a breakout above the current range of $62.50 - 63.50. Protective stops should be place just under $61.

Full Disclosure: Hold Position



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