Building up an investment case requires looking at a stock holistically. Today I’ve chosen to put the spotlight on Concho Resources Inc (NYSE:CXO) due to its excellent fundamentals in more than one area. CXO is a company with strong financial health as well as an optimistic future outlook. In the following section, I expand a bit more on these key aspects. For those interested in digger a bit deeper into my commentary, read the full report on Concho Resources here.
High growth potential with adequate balance sheet
Investors in search of impressive top-line expansion should look no further than CXO, with its expected revenue growth to more than double in the upcoming year, supported by its outstanding capacity to churn out cash from operating activities, which is predicted to more than double over the next year. This indicates that revenue is driven by high-quality cash from CXO’s day-to-day business as opposed to one-off income. CXO’s debt-to-equity ratio stands at 24%, which means its debt level is acceptable. This means that CXO’s capital structure strikes a good balance between low-cost debt funding and maintaining financial flexibility without overly restrictive terms of debt. CXO’s has produced operating cash levels of 0.84x total debt over the past year, which implies that CXO’s management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings.
Next Steps:
For Concho Resources, I’ve put together three key aspects you should look at:
- Historical Performance: What has CXO’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Valuation: What is CXO worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CXO is currently mispriced by the market.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of CXO? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.