Examining Key Petroleum Limited’s (ASX:KEY) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess KEY’s latest performance announced on 30 June 2017 and weight these figures against its longer term trend and industry movements. Check out our latest analysis for Key Petroleum
How KEY fared against its long-term earnings performance and its industry
I look at data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This allows me to assess various companies on a similar basis, using new information. For Key Petroleum, the most recent bottom-line -A$1.1M, which, in comparison to the previous year’s figure, has become less negative. Since these figures are relatively short-term, I have estimated an annualized five-year figure for KEY’s net income, which stands at -A$2.8M. This means that, even though net income is negative, it has become less negative over the years.
We can further evaluate Key Petroleum’s loss by looking at what has been happening in the industry on top of within the company. Firstly, I want to briefly look into the line items. Revenue growth over past couple of years has been negative at -24.41%. The key to profitability here is to make sure the company’s cost growth is well-managed. Looking at growth from a sector-level, the Australian oil, gas and consumable fuels industry has been ramping up average earnings growth of 57.50% over the prior year, and a more muted 5.14% over the past five years. This means any uplift the industry is enjoying, Key Petroleum has not been able to gain as much as its industry peers.
What does this mean?
Though Key Petroleum’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 occur going forward, and when. The most insightful step is to examine company-specific issues Key Petroleum may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Key Petroleum to get a more holistic view of the stock by looking at:
1. Financial Health: Is KEY’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.