At first glance, Exela Technologies (NASDAQ:XELA) might seem like a high-conviction business to invest in. Cautious financial traders should be wary of XELA stock, though. Exela’s fundamentals are subpar, and it’s possible that the company could be delisted in the near future.
Texas-headquartered Exela Technologies specializes in a niche field known as business process automation (BPA). Undoubtedly, the remote work phenomenon spurred by the Covid-19 pandemic in 2020 provided a tailwind to Exela Technologies.
That was then, however, and this is now. The pandemic catalyst has faded for Exela Technologies, and this is reflected in the company’s deteriorating fiscal data. This leads us to the first of three reasons to maintain a safe distance from XELA stock.
Exela Technologies Has a Declining Capital Position
It’s fine to believe in BPA in general. Indeed, there may be a robust future for BPA, but this doesn’t necessarily mean Exela Technologies will succeed in the long term. If the company isn’t sufficiently capitalized, Exela’s existence as a going concern could be imperiled.
Consider this: Exela Technologies’ total cash and cash equivalents declined from $20.78 million on Dec. 31, 2021, to just $10.4 million on Sept. 30, 2022. We’re talking about Exela’s capital position practically being cut in half in less than a year’s time.
This might help to explain why Exela Technologies failed to make the interest payments on some senior secured notes, due 2023 and 2026. Prospective investors, eager as they might be, shouldn’t ignore red flags like this.
Exela Technologies Has Shrinking Revenue and a Widening Net Loss
Staying on the topic of financials, Exela Technologies has both top-line and bottom-line issues. For one thing, Exela’s revenue shrank from $279.2 million in 2021’s third quarter to $264 million in the third quarter of 2022.
The company blamed its revenue reduction on “network outage, currency translation, transition revenue,” as well as “other customer losses and tight job markets.” It certainly sounds like Exela Technologies’ management is better at blaming external circumstances than solving company-specific problems.
Turning to the bottom line, Exela posted a Q3 2022 net earnings loss of $85.3 million. That’s much worse than the company’s net loss of $13.2 million from Q3 2021, so that’s another alarm bell ringing loud and clear.
XELA Stock Could Get Delisted from the Nasdaq Exchange
In case Exela Technologies didn’t have enough issues to deal with, here’s one more to add to the list. According to a Form 8-K, Exela has received multiple noncompliance notices from the Nasdaq exchange.
Last year, Exela Technologies was out of compliance with the Nasdaq exchange’s listing rules because XELA stock “closed at less than $1 per share over … 30 consecutive business days.” Then, in January of this year, the Nasdaq exchange warned Exela that its “securities had a closing bid price of $0.10 or less for eleven consecutive trading days.”
That’s two non-compliance notices in a matter of months. There’s a distinct possibility that Exela Technologies’ common shares could get kicked off of the Nasdaq exchange. So, why expose yourself to these issues? Save yourself some aggravation, and refrain from investing in Exela Technologies.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.