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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

Approach Resources

(

AREX

) 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 $12.4 million.
  • AREX has traded 224,419 shares today.
  • AREX is down 3.2% today.
  • AREX was up 5.9% yesterday.

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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 5.4. Currently there are 3 analysts that rate Approach Resources a buy, 5 analysts rate it a sell, and 8 rate it a hold.

TheStreet Recommends

The average volume for Approach Resources has been 1.8 million shares per day over the past 30 days. Approach has a market cap of $309.2 million and is part of the basic materials sector and energy industry. The stock has a beta of 2.02 and a short float of 30.8% with 5.84 days to cover. Shares are up 19.2% year-to-date as of the close of trading on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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 largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. 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 current debt-to-equity ratio, 0.52, is low and is below the industry average, implying that there has been successful management of debt levels.
  • Despite the weak revenue results, AREX has outperformed against the industry average of 18.7%. Since the same quarter one year prior, revenues slightly dropped by 6.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 58.0% when compared to the same quarter one year ago, falling from $64.32 million to $26.99 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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