In this article, I will take a look at Petsec Energy Ltd’s (ASX:PSA) most recent earnings update (30 June 2017) and compare these latest figures against its performance over the past few years, along with how the rest of PSA’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. Check out our latest analysis for Petsec Energy
Commentary On PSA’s Past Performance
I look at data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This blend allows me to assess different companies on a more comparable basis, using new information. Petsec Energy’s most recent earnings -$10.0M, which, relative to the previous year’s figure, has become less negative. Since these values may be relatively nearsighted, I’ve estimated an annualized five-year value for PSA’s earnings, which stands at -$11.3M. This means although net income is negative, it has become less negative over the years.
We can further evaluate Petsec Energy’s loss by looking at what’s going on in the industry along with within the company. Firstly, I want to quickly look into the line items. Revenue growth over the past couple of years has been negative at -34.91%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Inspecting growth from a sector-level, the Australian oil and gas industry has been enduring some headwinds over the prior twelve months, leading to an average earnings drop of -25.18%. This is a major change, given that the industry has constantly been delivering a a strong growth of 28.17% in the past five years. This means that any recent headwind the industry is enduring, Petsec Energy is less exposed compared to its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most insightful step is to assess company-specific issues Petsec Energy may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Petsec Energy to get a better picture of the stock by looking at:
1. Financial Health: Is PSA’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.