Yahoo Finance Did You Manage To Avoid Talon Petroleum's (ASX:TPD) Devastating 82% Share Price Drop?
Talon Petroleum Limited (ASX:TPD) shareholders should be happy to see the share price up 25% in the last week. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Like a ship taking on water, the share price has sunk 82% in that time. So we don't gain too much confidence from the recent recovery. The real question is whether the business can leave its past behind and improve itself over the years ahead.
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.
View our latest analysis for Talon Petroleum
With just AU$114,116 worth of revenue in twelve months, we don't think the market considers Talon Petroleum to have proven its business plan. This state of affairs suggests that venture capitalists won't provide funds on attractive terms. So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. For example, they may be hoping that Talon Petroleum finds fossil fuels with an exploration program, before it runs out of money.
As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some companies like this go on to deliver on their plan, making good money for shareholders, many end in painful losses and eventual de-listing. Talon Petroleum has already given some investors a taste of the bitter losses that high risk investing can cause.
When it last reported its balance sheet in June 2019, Talon Petroleum had cash in excess of all liabilities of AU$2.2m. That's not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. With the share price down 29% per year, over 5 years , it seems likely that the need for cash is weighing on investors' minds. You can click on the image below to see (in greater detail) how Talon Petroleum's cash levels have changed over time. You can click on the image below to see (in greater detail) how Talon Petroleum's cash levels have changed over time.
In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? I would feel more nervous about the company if that were so. You can click here to see if there are insiders selling.
A Different Perspective
Talon Petroleum shareholders are up 25% for the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 29% per year, over five years. It could well be that the business is stabilizing. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
We will like Talon 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 AU exchanges.
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.
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. Thank you for reading.
