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 weak on high relative volume 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 $14.6 million.
  • AREX has traded 171,047 shares today.
  • AREX is trading at 3.32 times the normal volume for the stock at this time of day.
  • AREX is trading at a new low 6.04% 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 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 4.8. Currently there are 5 analysts that rate Approach Resources a buy, 1 analyst rates it a sell, and 9 rate it a hold.

The average volume for Approach Resources has been 1.2 million shares per day over the past 30 days. Approach has a market cap of $346.5 million and is part of the basic materials sector and energy industry. The stock has a beta of 1.59 and a short float of 27.9% with 4.90 days to cover. Shares are down 52.9% year-to-date as of the close of trading on Wednesday.

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 robust revenue growth, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • AREX's very impressive revenue growth greatly exceeded the industry average of 1.9%. Since the same quarter one year prior, revenues leaped by 73.7%. 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.
  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.25 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 65.50%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 50.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 51.3% when compared to the same quarter one year ago, falling from $7.79 million to $3.79 million.

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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