For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Empire Energy Group Limited (ASX:EEG) useful as an attempt to give more color around how Empire Energy Group is currently performing. Check out our latest analysis for Empire Energy Group
How Well Did EEG Perform?
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 method enables me to assess various companies on a more comparable basis, using new information. For Empire Energy Group, its most recent earnings is -$7.7M, which, relative to the prior year’s level, has become less negative. Since these figures are somewhat nearsighted, I have estimated an annualized five-year value for EEG’s net income, which stands at -$2.9M. This shows that, Empire Energy Group has historically performed better than recently, despite the fact that it seems like earnings are now heading back towards to right direction again.
We can further assess Empire Energy Group’s loss by researching what has been happening in the industry as well as within the company. First, I want to briefly look into the line items. Revenue growth over the past couple of years has been negative at -9.83%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Looking at growth from a sector-level, the Australian oil and gas industry has been enduring some headwinds over the past 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 solid growth of 28.17% in the past couple of years. This means despite the fact that Empire Energy Group is currently loss-making, any near-term headwind the industry is facing, the impact on Empire Energy Group has been softer relative to its peers.
What does this mean?
Though Empire Energy Group’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to forecast what will happen in the future and when. The most useful step is to assess company-specific issues Empire Energy Group may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Empire Energy Group to get a more holistic view of the stock by looking at: