NEW YORK ( TheStreet) -- EXCO Resources (NYSE: XCO) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and disappointing return on equity. Highlights from the ratings report include:
- XCO'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 59.37%, 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. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Oil, Gas & Consumable Fuels industry and the overall market, EXCO RESOURCES INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- XCO's debt-to-equity ratio of 0.99 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.27 is sturdy.
- EXCO RESOURCES INC has improved earnings per share by 30.0% 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 year. 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 $3.12 versus -$2.39 in the prior year. For the next year, the market is expecting a contraction of 79.8% in earnings ($0.63 versus $3.12).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 30.9% when compared to the same quarter one year prior, rising from $64.90 million to $84.95 million.