Did Changing Sentiment Drive TAG Oil’s Share Price Down A Painful 88%?

Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. Imagine if you held TAG Oil Ltd. (TSE:TAO) for half a decade as the share price tanked 88%. It’s down 1.4% in the last seven days.

We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.

Check out our latest analysis for TAG Oil

Because TAG Oil is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn’t make profits, we’d generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last five years TAG Oil saw its revenue shrink by 21% per year. That puts it in an unattractive cohort, to put it mildly. So it’s not altogether surprising to see the share price down 35% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.

TSX:TAO Income Statement, March 6th 2019
TSX:TAO Income Statement, March 6th 2019

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

TAG Oil shareholders are down 1.4% for the year, but the market itself is up 4.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn’t as bad as the 35% per annum loss investors have suffered over the last half decade. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. If you would like to research TAG Oil in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.