Trade-Ideas: Concho Resources (CXO) Is Today's Weak On High Relative Volume Stock

Trade-Ideas LLC identified Concho Resources (CXO) as a weak on high relative volume candidate
By TheStreet Wire ,

Trade-Ideas LLC identified

Concho Resources

(

CXO

) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Concho Resources as such a stock due to the following factors:

  • CXO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $196.3 million.
  • CXO has traded 163,434 shares today.
  • CXO is trading at 2.94 times the normal volume for the stock at this time of day.
  • CXO is trading at a new low 3.04% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on CXO:

Concho Resources Inc., an independent oil and natural gas company, acquires, develops, and explores for oil and natural gas properties in the Unites States. The company's principal operating areas are located in the Permian Basin of southeast New Mexico and West Texas. CXO has a PE ratio of 63. Currently there are 14 analysts that rate Concho Resources a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Concho Resources has been 1.8 million shares per day over the past 30 days. Concho has a market cap of $13.8 billion and is part of the basic materials sector and energy industry. The stock has a beta of 0.94 and a short float of 3.9% with 2.13 days to cover. Shares are up 5.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Concho Resources as a

hold

. The company's strengths can be seen in multiple areas, such as its expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and generally higher debt management risk.

Highlights from the ratings report include:

  • The gross profit margin for CONCHO RESOURCES INC is rather high; currently it is at 68.56%. Regardless of CXO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CXO's net profit margin of 38.76% significantly outperformed against the industry.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 37.2%. Since the same quarter one year prior, revenues fell by 33.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CONCHO RESOURCES INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • Net operating cash flow has decreased to $271.66 million or 37.37% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

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