One Reason Talisman Energy (TLM) Stock Is Jumping Today

NEW YORK (TheStreet) -- Shares of Talisman Energy (TLM) were gaining 41.2% to $5.21 Friday following reports that Repsol (REPYY) is in talks to acquire the oil and gas company.

Senior executives of the Spain-based Repsol are currently in Calgary to discuss a deal that could value Talisman at up to $8 billion, according to Financial Times. The companies reportedly hope to agree on a deal before Christmas.

The companies are reportedly negotiating on a price of between $6 and $8 a share for Talisman.

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On Monday Talisman confirmed it was "approached by a number of parties, including Repsol, with regards to various transactions," adding that there was "no assurance that any transaction will be agreed."

TheStreet Ratings team rates TALISMAN ENERGY INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate TALISMAN ENERGY INC (TLM) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, TALISMAN ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $458.00 million or 28.10% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • TLM's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 66.06%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • TALISMAN ENERGY INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, TALISMAN ENERGY INC reported poor results of -$1.21 versus -$0.02 in the prior year.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.3%. Since the same quarter one year prior, revenues slightly dropped by 3.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: TLM Ratings Report

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