Today's Weak On High Volume Stock: Concho Resources (CXO)

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 Concho Resources ( CXO) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Concho Resources as such a stock due to the following factors:

  • CXO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $124.3 million.
  • CXO has traded 70,599 shares today.
  • CXO is trading at 2.25 times the normal volume for the stock at this time of day.
  • CXO is trading at a new low 3.04% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on CXO:

Concho Resources Inc., an independent oil and natural gas company, acquires, develops, and explores for oil and natural gas properties in the Unites States. The company's principal operating areas are located in the Permian Basin region of southeast New Mexico and West Texas. CXO has a PE ratio of 59.8. Currently there are 15 analysts that rate Concho Resources a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for Concho Resources has been 999,500 shares per day over the past 30 days. Concho has a market cap of $15.3 billion and is part of the basic materials sector and energy industry. The stock has a beta of 2.17 and a short float of 3.1% with 3.08 days to cover. Shares are up 25.7% year-to-date as of the close of trading on Friday.

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 Concho Resources as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 25.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $378.75 million or 41.61% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.22%.
  • The gross profit margin for CONCHO RESOURCES INC is currently very high, coming in at 80.85%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 1.67% trails the industry average.
  • The debt-to-equity ratio is somewhat low, currently at 0.70, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.97 is somewhat weak and could be cause for future problems.
  • Compared to its closing price of one year ago, CXO's share price has jumped by 38.80%, exceeding the performance of the broader market during that same time frame. 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.

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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