What happened

Shares of Exela Technologies (NASDAQ:XELA) tanked 10% on Friday after reporting disappointing third-quarter earnings. The business process automation (BPA) company missed badly on revenue, likely worrying investors about its prospects. 

So what

On Friday, Exela Technologies released its report for the third quarter, which covers the period ending in September. Earnings per share (EPS) beat analyst estimates, coming in at a loss of $0.09, but revenue missed badly in the quarter. Sales were $279.2 million in the third quarter, down 8.5% year over year, missing the consensus estimate by $36.5 million.

A disappointed-looking man leaning against an office window.

Image source: Getty Images.

In the report, management said it hopes to improve cash flow generation by $50 million in 2022. This is important since the company has $1.355 billion in debt and has had negative cash flow from operations over the last 12 months. If Exela is going to pay back its debt without going bankrupt, it is going to have to eventually start generating profits.

Investors likely didn't enjoy seeing revenue head in the wrong direction this quarter, as that indicates Exela is struggling to revive its business.

Now what

With a market cap of only $261 million, Exela Technologies might seem like a great value stock if you believe current management can turn this business around. But with so much debt on its balance sheet compared to how much revenue and profits the company generates, it is probably smart for all investors to avoid it at the moment. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.