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Did Changing Sentiment Drive TransGlobe Energy’s (NASDAQ:TGA) Share Price Down A Painful 73%?

Simply Wall St

TransGlobe Energy Corporation (NASDAQ:TGA) shareholders should be happy to see the share price up 13% in the last month. But that can’t change the reality that over the longer term (five years), the returns have been really quite dismal. In that time the share price has delivered a rude shock to holders, who find themselves down 73% after a long stretch. Some might say the recent bounce is to be expected after such a bad drop. We’d err towards caution given the long term under-performance.

Check out our latest analysis for TransGlobe Energy

Given that TransGlobe Energy didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. When a company doesn’t make profits, we’d generally expect to see good 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 the last five years TransGlobe Energy saw its revenue shrink by 25% per year. That puts it in an unattractive cohort, to put it mildly. So it’s not that strange that the share price dropped 23% per year in that period. We don’t think this is a particularly promising picture. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.

Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.

NasdaqGS:TGA Income Statement, March 12th 2019

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on TransGlobe Energy

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for TransGlobe Energy the TSR over the last 5 years was -70%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It’s nice to see that TransGlobe Energy shareholders have received a total shareholder return of 60% over the last year. That’s including the dividend. Notably the five-year annualised TSR loss of 21% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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.

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. Thank you for reading.