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Introducing TAG Oil (TSE:TAO), The Stock That Tanked 83%

TAG Oil Ltd. (TSE:TAO) shareholders should be happy to see the share price up 10% in the last quarter. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Like a ship taking on water, the share price has sunk 83% in that time. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The important question is if the business itself justifies a higher share price in the long term.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

View our latest analysis for TAG Oil

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TAG Oil isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last five years TAG Oil saw its revenue shrink by 15% per year. That puts it in an unattractive cohort, to put it mildly. So it's not altogether surprising to see the share price down 30% per year in the same time period. This kind of price performance makes us very wary, especially when combined with falling revenue. Of course, the poor performance could mean the market has been too severe selling down. That can happen.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

TSX:TAO Income Statement, September 6th 2019
TSX:TAO Income Statement, September 6th 2019

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

TAG Oil shareholders are down 2.6% for the year, but the market itself is up 1.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 30% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. If you would like to research TAG Oil in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

Of course TAG Oil may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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