The market has been offering a number of stocks trading higher on strong volume.  Even on days when the market has closed lower, the number of individual stocks enjoying surges remained strong.  Two stocks which have enjoyed recent strong accumulation are DigitalGlobe Inc (NYSE:DGI) and Harvest Natural Resources, Inc. (NYSE:HNR), but not all may be what it seems.  While heavier volume buying is typically bullish, the reasons for it are not always clear.  It's sometimes the case on digging a little deeper, it subsequently becomes apparent such 'bullish' opportunities are best left to others.

DigitalGlobe could be viewed as a case of glass half full, or glass half empty.  The glass half full crew will view a stock which has enjoyed consistent gains over the past 6-months, rising on higher volume and easing back on low volume.  The glass half empty crowd will see the 6-month gain as just a slog back following a hard fall, and a journey far from complete. This fall was not one triggered by the credit crisis, but one built off fears of a drop in government defense spending. However, the recent buying surge was attributed to an Antitrust Clearance for a merger with GeoEye Inc. (NASDAQ:GEOY). This merger will ensure the sustainability of the company as a drop in military contracts put in jeopardy the survival of two companies.  In the case of GeoEye, domestic government contracts accounted for two-thirds of revenues, with foreign government contracts accounting for a quarter, leaving just a small portion of revenue associated with the private market.  GeoEye recently announced a deal with the Indian government, although the total value of the deal was not disclosed.

What would the merged revenues of the bigger DigitalGlobe possibly look like?  For the most recent quarter, Total Revenue would have come in at $194 million with a Net Income of $16.1 million; not bad.  In annual terms, DigitalGlobe reported a loss in 2011 of $28.1 million, but GeoEye came in with a profit of $46.9 million, offsetting the loss.  We can assume any merger will bring 'cost efficiencies' (aka Layoffs) which will boost Net Income.  Assuming all Shares Outstanding of GeoEye were converted to DigitalGlobe at the proposed 1.425:1 ratio, there would be 32 million new shares of DigitalGlobe (+24.8 million Float); this would bring the total number of Shares Outstanding to 79 million with a 60.5 million Float.  An approximate annual EPS for the merged company would be 0.24, with a trailing P/E of 119 based off DigitalGlobe's current close. This would give pause for concern at DigitalGlobe's current price, and is significantly higher than GeoEye's existing P/E of 17.9 (DigitalGlobe with an annual loss has no P/E to report).  The merger is a good thing for both companies, but it might be a little early to be jumping aboard as a buyer.