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It's nice to see the Basic Energy Services, Inc. (NYSE:BAS) share price up 13% in a week. But that isn't much consolation for the painful drop we've seen in the last year. During that time the share price has plummeted like a stone, down 82%. So it's not that amazing to see a bit of a bounce. Only time will tell if the company can sustain the turnaround.
We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Because Basic Energy Services is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. 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 year Basic Energy Services saw its revenue grow by 1.2%. That's not a very high growth rate considering it doesn't make profits. Even so you could argue that it's surprising that the share price has tanked 82%. Clearly the market was expecting better, and this may blow out projections of profitability. If and only if this company is still likely to succeed, just a little slower, this could be a good opportunity.
You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on Basic Energy Services
A Different Perspective
While Basic Energy Services shareholders are down 82% for the year, the market itself is up 4.6%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 54% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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.
Basic Energy Services 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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