Even though Kosmos Energy (NYSE:KOS) has lost US$104m market cap in last 7 days, shareholders are still up 132% over 3 years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But in contrast you can make much more than 100% if the company does well. To wit, the Kosmos Energy Ltd. (NYSE:KOS) share price has flown 132% in the last three years. How nice for those who held the stock! In the last week shares have slid back 3.9%.

Since the long term performance has been good but there's been a recent pullback of 3.9%, let's check if the fundamentals match the share price.

View our latest analysis for Kosmos Energy

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Kosmos Energy became profitable within the last three years. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It is of course excellent to see how Kosmos Energy has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Kosmos Energy stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

Investors in Kosmos Energy had a tough year, with a total loss of 20%, against a market gain of about 20%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.7% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Kosmos Energy better, we need to consider many other factors. For example, we've discovered 2 warning signs for Kosmos Energy that you should be aware of before investing here.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com