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Did You Manage To Avoid Callon Petroleum's (NYSE:CPE) Devastating 76% Share Price Drop?

Simply Wall St

Callon Petroleum Company (NYSE:CPE) shareholders should be happy to see the share price up 13% in the last week. But only the myopic could ignore the astounding decline over three years. Indeed, the share price is down a whopping 76% in the last three years. Arguably, the recent bounce is to be expected after such a bad drop. Of course the real question is whether the business can sustain a turnaround.

See our latest analysis for Callon Petroleum

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

During five years of share price growth, Callon Petroleum moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.

We note that, in three years, revenue has actually grown at a 40% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Callon Petroleum more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

NYSE:CPE Income Statement, December 8th 2019

Callon Petroleum is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Callon Petroleum in this interactive graph of future profit estimates.

A Different Perspective

Investors in Callon Petroleum had a tough year, with a total loss of 49%, against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2.0% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Before spending more time on Callon Petroleum it might be wise to click here to see if insiders have been buying or selling shares.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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