Talos Energy (TALO) Hits Fresh High: Is There Still Room to Run?

Shares of Stone Energy (TALO) have been strong performers lately, with the stock up 21.7% over the past month. The stock hit a new 52-week high of $31 in the previous session. Stone Energy has gained 2.6% since the start of the year compared to the 2.3% move for the Zacks Oils-Energy sector and the 3.6% return for the Zacks Oil and Gas - Exploration and Production - United States industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 6, 2019, Talos Energy reported EPS of $0.81 versus consensus estimate of $0.64.

For the current fiscal year, Talos Energy is expected to post earnings of $2.63 per share on $943.8 million in revenues.

Valuation Metrics

Talos Energy may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Talos Energy has a Value Score of B. The stock's Growth and Momentum Scores are B and A, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 11.8X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 3.7X versus its peer group's average of 2.7X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Talos Energy currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Talos Energy meets the list of requirements. Thus, it seems as though Talos Energy shares could have a bit more room to run in the near term.

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