Stock Analysis

If You Had Bought Gulf Keystone Petroleum's (LON:GKP) Shares Five Years Ago You Would Be Down 87%

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LSE:GKP
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Gulf Keystone Petroleum Limited (LON:GKP) shareholders will doubtless be very grateful to see the share price up 110% in the last quarter. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Five years have seen the share price descend precipitously, down a full 87%. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The million dollar question is whether the company can justify a long term recovery.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Check out our latest analysis for Gulf Keystone Petroleum

Given that Gulf Keystone Petroleum didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last half decade, Gulf Keystone Petroleum saw its revenue increase by 15% per year. That's a pretty good rate for a long time period. So the stock price fall of 13% per year seems pretty steep. The market can be a harsh master when your company is losing money and revenue growth disappoints.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
LSE:GKP Earnings and Revenue Growth January 15th 2021

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Gulf Keystone Petroleum stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

While the broader market lost about 3.9% in the twelve months, Gulf Keystone Petroleum shareholders did even worse, losing 22%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. However, the loss over the last year isn't as bad as the 13% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Gulf Keystone Petroleum you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do 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 GB exchanges.

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