Research

CXO – Market expectations are for Uniform ROA to remain muted, and management appears concerned about macroeconomic uncertainty, their efficiency, and business plans

October 14, 2020
  • Concho Resources Inc. (CXO:USA) currently trades at a discount to UAFRS-based (Uniform) assets, with a 0.7x Uniform P/B. At these levels, the market has expectations for profitability to remain muted, and management appears concerned about macroeconomic uncertainty, their efficiency, and business plans
  • Specifically, management may have concerns about the macroeconomic picture, their limited strategic options, and their ability to increase their percentage of recycled water use. In addition, they may lack confidence in their ability to improve their efficiency and utilize the most effective opportunity for their free cash flow. Furthermore, they may be overstating their focus on long-term value, and they may be concerned about the signals they are receiving from the market