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Is KLX Energy (NASDAQ:KLXE) surge rational based on latest volatility?

December 6, 2020  By Rifka Kats
Macroaxis Story
KLX Energy is currently generating 0.6043% in daily expected returns and assumes 6.2102% risk (volatility on return distribution) over the 90 days horizon. As many investors are getting excited about energy space, it is fair to digest KLX Energy Services. We will discuss how risky is to take a position in KLX Energy at this time. The latest KLX Energy risk factors may impact the value of the stock as we estimate KLX Energy as currently undervalued. The real value is approaching 9.58 per share.
Published over a year ago
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Reviewed by Gabriel Shpitalnik

KLX Energy Services currently holds 243.4 M in liabilities with Debt to Equity (D/E) ratio of 2.44, implying KLX Energy greatly relies on financing operations through barrowing. The entity has a current ratio of 2.37, suggesting that it is liquid enough and is able to pay its financial obligations when due. On a scale of 0 to 100, KLX Energy holds a performance score of 6. The company secures a Beta (Market Risk) of -0.091, which conveys not very significant fluctuations relative to the market. Let's try to break down what KLX Energy's beta means in this case. As returns on the market increase, returns on owning KLX Energy are expected to decrease at a much lower rate. During the bear market, KLX Energy is likely to outperform the market. Although it is vital to follow KLX Energy Services price patterns, it is good to be conservative about what you can do with the information regarding equity historical price patterns. The approach into estimating future performance of any stock is to evaluate the business as a whole together with its past performance, including all available fundamental and technical indicators. We have found twenty-one technical indicators for KLX Energy, which you can use to evaluate the performance of the firm. Please exercises KLX Energy Services jensen alpha and downside variance to make a quick decision on whether KLX Energy Services current price movements will revert.
Volatility is a rate at which the price of KLX Energy or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of KLX Energy may increase or decrease. In other words, similar to KLX's beta indicator, it measures the risk of KLX Energy and helps estimate the fluctuations that may happen in a short period of time. So if prices of KLX Energy fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.

How important is KLX Energy's Liquidity

KLX Energy financial leverage refers to using borrowed capital as a funding source to finance KLX Energy Services ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. KLX Energy financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to KLX Energy's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of KLX Energy's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between KLX Energy's total debt and its cash.

How does KLX utilize its cash?

At present, KLX Energy's Stock Based Compensation is projected to increase significantly based on the last few years of reporting. . To perform a cash flow analysis of KLX Energy, investors first need to understand how to read the cash flow statement. A cash flow statement shows the amount of cash KLX Energy is receiving and how much cash it distributes out in a given period. The KLX Energy cash flow statement breaks down these inflows and outflows into different buckets, including operating activities, investing activities, and financing activities.

KLX Energy Gross Profit

KLX Energy Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing KLX Energy previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show KLX Energy Gross Profit growth over the last 10 years. Please check KLX Energy's gross profit and other fundamental indicators for more details.

KLX Energy Volatility Drivers

KLX Energy unsystematic risk is unique to KLX Energy Services and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in KLX Energy you can also buy RPC Inc. You can also mitigate this risk by investing in the energy sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing KLX Energy important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in KLX Energy income statement and balance sheet. Here are more details about KLX volatility.
Total Assets
Total Liab
Common Stock
Net Debt
Total Assets
0.83-0.890.47
Total Liab
0.83-0.960.88
Common Stock
-0.89-0.96-0.77
Net Debt
0.470.88-0.77
Click cells to compare fundamentals

Details

The latest price surge of KLX Energy Services may raise some interest from shareholders. The stock closed today at a share price of 7.96 on very low momentum in trading volume. The company executives may have good odds in positioning the firm resources to exploit market volatility in January. The stock standard deviation of daily returns for 30 days investing horizon is currently 6.21. The very high volatility is mostly attributed to the latest market swings and not very good earnings reports from some of the KLX Energy Services partners.
 2017 2018 2019 2020 (projected)
Revenues USD320.5 M495.3 M544 M490.48 M
Revenues320.5 M495.3 M544 M490.48 M
Revenues USDRevenues

Our perspective of the latest KLX Energy surge

The kurtosis is down to 1.22 as of today. As of the 6th of December, KLX Energy secures the Market Risk Adjusted Performance of (3.47), mean deviation of 4.68, and Risk Adjusted Performance of 0.0688. KLX Energy Services technical analysis lets you operate historical price patterns with an objective to determine a pattern that forecasts the direction of the firm's future prices. Strictly speaking, you can use this information to find out if the firm will indeed mirror its model of past prices, or the prices will eventually revert. We were able to analyze and collect data for nineteen technical drivers for KLX Energy, which can be compared to its peers in the industry. Please verify KLX Energy Services jensen alpha and downside variance to decide if KLX Energy Services is priced more or less accurately, providing market reflects its recent price of 7.96 per share. Given that KLX Energy Services has jensen alpha of 0.3299, we recommend you to check KLX Energy's last-minute market performance to make sure the company can sustain itself at some point in the future.

Although many other companies under the oil & gas equipment & services industry are still a bit expensive, KLX Energy may offer a potential longer-term growth to shareholders. To conclude, as of the 6th of December 2020, we see that KLX Energy moves indifferently to market moves. The firm is undervalued with close to average chance of financial distress within the next 24 months. However, our present 30 days 'Buy-vs-Sell' recommendation on the firm is Strong Sell.

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Editorial Staff

Rifka Kats is a Member of Macroaxis Editorial Board. Rifka writes about retail product and service companies from the perspective of a regular consumer and sophisticated investor at the same time. She is passionate about corporate ethics and equality in the workforce. View Profile
This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Rifka Kats do not own shares of KLX Energy Services. Please refer to our Terms of Use for any information regarding our disclosure principles.

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