It is doubtless a positive to see that the Talos Energy Inc. (NYSE:TALO) share price has gained some 42% in the last three months. But that doesn't change the fact that the returns over the last year have been disappointing. Like a receding glacier in a warming world, the share price has melted 65% in that period. So the bounce should be viewed in that context. Arguably, the fall was overdone.
Because Talos Energy made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In just one year Talos Energy saw its revenue fall by 33%. That looks pretty grim, at a glance. The share price drop of 65% is understandable given the company doesn't have profits to boast of. Fingers crossed this is the low ebb for the stock. We don't generally like to own companies with falling revenues and no profits, so we're pretty cautious of this one, at the moment.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
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 Talos Energy stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
Given that the market gained 22% in the last year, Talos Energy shareholders might be miffed that they lost 65%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 42% rebound in the last three months. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). It's always interesting to track share price performance over the longer term. But to understand Talos Energy better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Talos Energy (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
Talos Energy is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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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What are the risks and opportunities for Talos Energy?
Trading at 78.4% below our estimate of its fair value
Became profitable this year
Earnings are forecast to decline by an average of 8% per year for the next 3 years
Has a high level of debt
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. 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.
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Talos Energy Inc., an independent exploration and production company, focuses on the exploration and production of oil and natural gas properties in the United States Gulf of Mexico and offshore Mexico.
Undervalued with proven track record.