The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Kosmos Energy Ltd. (NYSE:KOS) share price has soared 119% in the last year. Most would be very happy with that, especially in just one year! It's down 3.3% in the last seven days. Unfortunately the longer term returns are not so good, with the stock falling 63% in the last three years.
Kosmos Energy wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Kosmos Energy actually shrunk its revenue over the last year, with a reduction of 46%. So we would not have expected the share price to rise 119%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. It's quite likely the revenue fall was already priced in, anyway.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
This free interactive report on Kosmos Energy's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's nice to see that Kosmos Energy shareholders have received a total shareholder return of 119% over the last year. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Kosmos Energy , and understanding them should be part of your investment process.
We will like Kosmos Energy 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.
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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