Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.
Trade-Ideas LLC identified
) as a "perilous reversal" (up big yesterday but down big today) 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 $19.9 million.
- AREX has traded 52,867 shares today.
- AREX is down 4.1% today.
- AREX was up 8.1% yesterday.
EXCLUSIVE OFFER: Get the inside scoop on opportunities in AREX with the Ticky from Trade-Ideas. See the FREE profile for AREX NOW at Trade-Ideas
More details on AREX:
Approach Resources Inc., an independent energy company, is engaged in the acquisition, development, exploration, and production of oil and gas properties in the United States. AREX has a PE ratio of 4.6. Currently there are 5 analysts that rate Approach Resources a buy, 1 analyst rates it a sell, and 9 rate it a hold.
The average volume for Approach Resources has been 1.3 million shares per day over the past 30 days. Approach has a market cap of $437.1 million and is part of the basic materials sector and energy industry. The stock has a beta of 1.59 and a short float of 27.5% with 4.77 days to cover. Shares are down 38.1% year-to-date as of the close of trading on Wednesday.
rates Approach Resources as a
. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself.
Highlights from the ratings report include:
- AREX's very impressive revenue growth greatly exceeded the industry average of 6.7%. Since the same quarter one year prior, revenues leaped by 54.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The current debt-to-equity ratio, 0.46, is low and is below the industry average, implying that there has been successful management of debt levels.
- APPROACH 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, APPROACH RESOURCES INC increased its bottom line by earning $1.85 versus $0.19 in the prior year. For the next year, the market is expecting a contraction of 57.8% in earnings ($0.78 versus $1.85).
- AREX's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 68.67%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- Net operating cash flow has decreased to $62.54 million or 15.66% 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.
- You can view the full Approach Resources Ratings Report.