Why is talisman stock so low

Weak oil prices are raising the prospect of heightened takeover activity in the Canadian oilpatch, with Talisman Energy Inc. Talisman, with operations spanning the world, has been a perennial subject of takeover speculation, but so far none of the rumours has borne out. It acknowledged this week that it had been approached by Repsol and others about unspecified deals but added it wouldn't comment on speculation and that there was no assurance that a transaction would happen.

However, Edward Jones analyst Lanny Pendill said a Talisman takeover might actually pan out this time because it's such a bargain. As of Thursday's close, Talisman's shares were down by about two-thirds since mid-summer. While Talisman's North American shale and Southeast Asian operations might be enticing to a potential buyer, its offshore assets in the North Sea have been prone to unplanned outages and have struggled to meet output targets.

Bankers, former investors and analysts say the Calgary firm will not lack for suitors for its individual assets. But taking on the entire company, which has been in midst of restructuring that has seen it cut debt and trim operations, may be a tough ask, partly because its assets are disparate. These include oil and gas assets in Indonesia, Malaysia and Vietnam expected to generate a large part of its cash flow.

Talisman could not be immediately reached for comment. Therefore, from June it had 2. Arguably, that's a prudent and sensible length of runway to have. You can see how its cash balance has changed over time in the image below. Given how low that operating leverage is, we think it's too early to put much weight on the revenue growth, so we'll focus on how the cash burn is changing, instead.

Admittedly, we're a bit cautious of Talisman Mining due to its lack of significant operating revenues. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth. While Talisman Mining is showing a solid reduction in its cash burn, it's still worth considering how easily it could raise more cash, even just to fuel faster growth.

Companies can raise capital through either debt or equity. Commonly, a business will sell new shares in itself to raise cash and drive growth.

By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year at the same burn rate. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution. The good news is that in our view Talisman Mining's cash burn situation gives shareholders real reason for optimism.

Not only was its cash burn reduction quite good, but its cash runway was a real positive. Based on the factors mentioned in this article, we think its cash burn situation warrants some attention from shareholders, but we don't think they should be worried. Separately, we looked at different risks affecting the company and spotted 3 warning signs for Talisman Mining of which 1 can't be ignored! If you would prefer to check out another company with better fundamentals, then do not miss this free list of interesting companies, that have HIGH return on equity and low debt or this list of stocks which are all forecast to grow.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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