Earnings are growing at Callon Petroleum (NYSE:CPE) but shareholders still don't like its prospects

Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. Zooming in on an example, the Callon Petroleum Company (NYSE:CPE) share price dropped 62% in the last half decade. That's an unpleasant experience for long term holders. On top of that, the share price is down 6.6% in the last week.

Since Callon Petroleum has shed US$182m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out the opportunities and risks within the US Oil and Gas industry.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Callon Petroleum moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

In contrast to the share price, revenue has actually increased by 42% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Callon Petroleum has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Callon Petroleum stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

Although it hurts that Callon Petroleum returned a loss of 20% in the last twelve months, the broader market was actually worse, returning a loss of 25%. Given the total loss of 10% per year over five years, it seems returns have deteriorated in the last twelve months. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. It's always interesting to track share price performance over the longer term. But to understand Callon Petroleum better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Callon Petroleum (including 1 which shouldn't be ignored) .

We will like Callon Petroleum better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.