Is Southwestern Energy Company (NYSE: SWN) A Reliable Long-Term Value Pick?

Natural gas companies such as Southwestern Energy Company (NYSE: SWN) have experienced a major rout in the last few weeks following a significant sell-off in the natural gas industry triggered by a decline in natural gas prices. Stocks in the natural gas industry were already trading at multi-year lows and the recent sell-off has driven the prices of these stocks much lower.

Other companies affected by the recent sell-off include Range Resources Corp. (NYSE: RRC), Parsley Energy Inc (NYSE: PE) and Gulfport Energy Corporation (NASDAQ: GPOR). Furthermore, the recent drawdown has driven Southwestern Energy’s current market capitalization to $1.83 billion, while it has a book value of $2.5 billion.

The above metrics imply that SWN’s market cap to book value is less than 1 and given that the company is operating profitably, this indicates that it is currently undervalued. The company has cash on its balance sheet of about $1 billion and expects to fund all its future capital projects using operating cash flows.

Our technical analysis indicates that the company’s revenue has been declining over the past three quarters as outlined in the charts below. The stock is currently trading below a crucial resistance level in our long-term trading plans, which is further elaborated in the free real-time trading plan provided below.

Our combined analysis indicates that the company’s quarterly revenue growth has been relatively stable over the years except for a sudden dip in Q1 2016 and a sudden spike in Q1 2017. The company’s upcoming quarterly revenue growth is expected to be slightly higher than the Q3 quarterly growth print.

However, the company’s annual growth trajectory, which has been quite similar to the quarterly growth trajectory is expected to deviate slightly this year as annual growth is expected to decline over the next two years. Value driven investors might be inclined to hold this stock for the long-term citing its upside potential, but as risk-conscious traders we focus on trading the daily movements of stocks, especially through ETFs with exposure the entire energy industry.

Based on the technical data and associated charts at the time this article was written, Stock Traders Daily has provided detailed trading plans, with integrated risk controls, to its clients. These plans will change in real time as prices move. To receive an update or to review the detailed trading plans associated with this data please review our Real Time Trading Report for SWN.

Review the Trading Plans:

Technical Summary

Term →Near Mid Long
Bias Strong Weak Neutral
P1 3.67 2.84 3.66
P2 3.87 3.77 4.96
P3 0 4.67 6.26

Long Term Trading Plans for SWN

February 27, 2018, 10:22 am ET

The technical Summary and associated Trading Plans for SWN listed below will help you make important timing decisions for your trades. This data is based on our proprietary analysis for SWN. In addition we offer Market Timing Models and Stock Filters in the links above which may increase the proficiency of the decisions you make.

SWN - (Long) Support Plan

Buy over 3.66 target 4.96 stop loss @ 3.4.
The technical summary data tells us to buy SWN near 3.66 with an upside target of 4.96. This data also tells us to set a stop loss @ 3.4 to protect against excessive loss in case the stock begins to move against the trade. 3.66 is the first level of support below 3.73 , and by rule, any test of support is a buy signal. In this case, support 3.66 would be being tested, so a buy signal would exist.

SWN - (Short) Resistance Plan

Short under 4.96 target 3.66 stop loss @ 5.22.
The technical summary data is suggesting a short of SWN as it gets near 4.96 with a downside target of 3.66. We should have a stop loss in place at 5.22 though. 4.96 is the first level of resistance above 3.73, and by rule, any test of resistance is a short signal. In this case, if resistance 4.96 is being tested, so a short signal would exist.

SWN Long Term Analysis

SWN EPS Analysis

SWN Dividend Chart

SWN Revenue chart

SWN Growth rate - Quarterly

SWN Growth rate - Yearly