Why Abraxas Petroluem (AXAS) Shares Are Falling

NEW YORK (TheStreet) -- Abraxas Petroleum (AXAS) was falling 7.4% to $3.66 Thursday following a downgrade from Canaccord.

Canaccord downgraded Abraxas to "hold" from "buy," though it raised its price target for the company to $4.25 from $4. The downgrade was due to a valuation call.

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TheStreet Ratings team rates ABRAXAS PETROLEUM CORP/NV as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ABRAXAS PETROLEUM CORP/NV (AXAS) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, compelling growth in net income, notable return on equity and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.8%. Since the same quarter one year prior, revenues rose by 18.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 323.07% and other important driving factors, this stock has surged by 66.23% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AXAS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ABRAXAS PETROLEUM CORP/NV's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 327.5% when compared to the same quarter one year prior, rising from -$11.87 million to $27.00 million.
  • ABRAXAS PETROLEUM CORP/NV 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, ABRAXAS PETROLEUM CORP/NV turned its bottom line around by earning $0.41 versus -$0.20 in the prior year. For the next year, the market is expecting a contraction of 24.4% in earnings ($0.31 versus $0.41).
  • You can view the full analysis from the report here: AXAS Ratings Report

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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.

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