When Carbon Energy Limited (ASX:CNX) released its most recent earnings update (30 June 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Carbon Energy’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not CNX actually performed well. Below is a quick commentary on how I see CNX has performed. Check out our latest analysis for Carbon Energy
Did CNX’s recent EPS Growth beat the long-term trend and the industry?
For the most up-to-date info, I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method enables me to analyze many different companies on a similar basis, using the latest information. Carbon Energy’s most recent earnings -A$39.3M, which, against the prior year’s figure, has become less negative. Since these values may be somewhat myopic, I have calculated an annualized five-year figure for Carbon Energy’s net income, which stands at -A$32.9M. This suggests that, Carbon Energy has historically performed better than recently, though it seems like earnings are now heading back towards a more favorable position once more.
Additionally, we can analyze Carbon Energy’s loss by looking at what’s going on in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over past few years has been negative at -53.96%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Eyeballing growth from a sector-level, the Australian oil and gas industry has been enduring some headwinds in the past twelve months, leading to an average earnings drop of -25.18%. This is a significant change, given that the industry has constantly been delivering a a strong growth of 28.17% in the previous few years. This means any near-term headwind the industry is facing, Carbon Energy is less exposed compared to its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most insightful step is to examine company-specific issues Carbon Energy may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Carbon Energy to get a more holistic view of the stock by looking at: