Story updated at 10 a.m. to reflect market activity.
EXCO fell 5.4% to $6.01 in morning trading.
The firm set a price target of $4 for the company. RBC analysts said interference issues in Haynesville have cut into EXCO's net asset value.
Separately, TheStreet Ratings team rates EXCO RESOURCES INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate EXCO RESOURCES INC (XCO) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, generally high debt management risk, premium valuation and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- XCO has underperformed the S&P 500 Index, declining 17.50% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- The debt-to-equity ratio is very high at 12.78 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, XCO maintains a poor quick ratio of 0.83, which illustrates the inability to avoid short-term cash problems.
- The gross profit margin for EXCO RESOURCES INC is rather low; currently it is at 17.33%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, XCO's net profit margin of -68.09% significantly underperformed when compared to the industry average.
- EXCO RESOURCES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, EXCO RESOURCES INC turned its bottom line around by earning $0.11 versus -$6.51 in the prior year. For the next year, the market is expecting a contraction of 18.2% in earnings ($0.09 versus $0.11).
- You can view the full analysis from the report here: XCO Ratings Report