Examining Vital Energy Inc’s (TSXV:VUX) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess VUX’s latest performance announced on 30 September 2017 and compare these figures to its longer term trend and industry movements. View our latest analysis for Vital Energy
Were VUX’s earnings stronger than its past performances and the industry?
I look at data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique allows me to examine many different companies in a uniform manner using the latest information. For Vital Energy, the latest earnings -CA$0.7M, which, relative to last year’s level, has become less negative. Given that these figures are fairly nearsighted, I’ve computed an annualized five-year value for Vital Energy’s earnings, which stands at -CA$3.8M. This suggests that, while net income is negative, it has become less negative over the years.
We can further evaluate Vital Energy’s loss by looking at what’s going on in the industry along with within the company. First, I want to quickly look into the line items. Revenue growth over last couple of years has grown by a mere 7.53%. Given that top-line growth is also pretty flat, the key to profitability in the future would be managing cost growth rates. Looking at growth from a sector-level, the Canadian oil, gas and consumable fuels industry has been growing its average earnings by double-digit 11.17% over the previous twelve months, and a flatter 0.38% over the previous few years. This means that, although Vital Energy is presently loss-making, it may have gained from industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Though Vital Energy’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to predict what will happen in the future and when. The most insightful step is to examine company-specific issues Vital Energy may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Vital Energy to get a more holistic view of the stock by looking at:
1. Financial Health: Is VUX’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.