Why Jim Cramer Calls Concho Resources' (CXO) Secondary Offering The Best of 2014

NEW YORK (TheStreet) -- TheStreet's Jim Cramer says Concho Resources' (CXO) secondary offering is the best he has seen so far this year.

The company priced 6.5 million shares at $129 each and the stock immediately flew up to $131. He contrasts this with FireEye  (FEYE) and other secondary offerings in the Internet space that have collapsed immediately. He says this means those stocks are under distribution and people do not want those offerings. 

But Cramer says people clamor for anything oil-related, and Concho has a presence in the Permian Basin. Cramer calls this prime location "the great growth story going on right now" with 20% to 30% growth for companies in the Permian.

Must Watch: Jim Cramer: Concho Resources Is the Best Secondary Offering in 2014

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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Separately, TheStreet Ratings team rates CONCHO RESOURCES INC as a "buy" with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CONCHO RESOURCES INC (CXO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, expanding profit margins, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

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

  • The revenue growth greatly exceeded the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 32.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Oil, Gas & Consumable Fuels industry average. The net income increased by 40.5% when compared to the same quarter one year prior, rising from $75.29 million to $105.79 million.
  • The gross profit margin for CONCHO RESOURCES INC is currently very high, coming in at 79.89%. Regardless of CXO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CXO's net profit margin of 16.73% significantly outperformed against the industry.
  • Net operating cash flow has slightly increased to $417.38 million or 6.51% when compared to the same quarter last year. Despite an increase in cash flow, CONCHO RESOURCES INC's average is still marginally south of the industry average growth rate of 16.30%.
  • Powered by its strong earnings growth of 29.48% and other important driving factors, this stock has surged by 58.43% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • You can view the full analysis from the report here: CXO Ratings Report

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

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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