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Trade-Ideas LLC identified

Approach Resources

(

AREX

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

  • AREX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.3 million.
  • AREX has traded 112,520 shares today.
  • AREX is trading at 2.18 times the normal volume for the stock at this time of day.
  • AREX is trading at a new high 6.12% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into 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. 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 AREX:

TheStreet Recommends

Approach Resources Inc., an independent energy company, focuses on the exploration, development, production, and acquisition of unconventional oil and gas reserves in the United States. The company's properties are primarily located in the Permian Basin in west Texas. AREX has a PE ratio of 3. Currently there are 4 analysts that rate Approach Resources a buy, 4 analysts rate it a sell, and 7 rate it a hold.

The average volume for Approach Resources has been 973,700 shares per day over the past 30 days. Approach has a market cap of $99.0 million and is part of the basic materials sector and energy industry. The stock has a beta of 2.21 and a short float of 27.2% with 6.05 days to cover. Shares are down 59.6% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Approach Resources as a

hold

. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:

  • The debt-to-equity ratio is somewhat low, currently at 0.66, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.27 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The gross profit margin for APPROACH RESOURCES INC is currently very high, coming in at 74.38%. Regardless of AREX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AREX's net profit margin of -30.69% significantly underperformed when compared to the industry average.
  • 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, APPROACH 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 $22.86 million or 37.71% 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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