Why Approach Resources Got Crushed

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What: Shares of oil and gas producer Approach Resources (NAS: AREX) fell as much as 10% in early trading after the company announced earnings.

So what: Total production increased 39% in the first quarter and revenue grew 52% to $30.6 million. But adjusted net income was only $3.5 million, or $0.10 per share, and analysts had expected earnings of $0.19 per share.


Now what: The expectations are getting high for oil and gas companies right now, and those that aren't beginning to turn a significant profit are being punished. Shares still trade at 18 times forward earnings estimates, and after this miss I wonder whether shares will look even more expensive. I'm not buying the move today and would like to see the company meet expectations before getting excited about this energy producer.

Interested in more info on Approach Resources? Add it to yourWatchlist.

At the time this article was published Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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