Examining K2 Energy Limited’s (ASX:KTE) 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 KTE’s latest performance announced on 30 June 2017 and compare these figures to its longer term trend and industry movements. See our latest analysis for K2 Energy
Did KTE’s recent earnings 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 technique allows me to analyze different companies on a more comparable basis, using new information. For K2 Energy, its most recent earnings is -A$0.3M, which, in comparison to the previous year’s level, has become less negative. Given that these figures may be somewhat myopic, I have determined an annualized five-year value for K2 Energy’s net income, which stands at -A$0.6M. This suggests that, even though net income is negative, it has become less negative over the years.
Additionally, we can analyze K2 Energy’s loss by looking at what has been happening in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the past couple of years has more than doubled, indicating that K2 Energy is in a high-growth period with expenses racing ahead elevated top-line growth rates, leading to yearly losses. Eyeballing growth from a sector-level, the Australian renewable energy industry has been enduring some headwinds in the previous year, leading to an average earnings drop of -24.26%. This is a major change, given that the industry has been delivering a positive rate of 9.21%, on average, over the previous few years. This suggests that while K2 Energy is currently loss-making, whatever near-term headwind the industry is enduring, K2 Energy is less exposed compared to its peers.
What does this mean?
Though K2 Energy’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to envisage what will happen in the future and when. The most useful step is to assess company-specific issues K2 Energy may be facing and whether management guidance has consistently been met in the past. You should continue to research K2 Energy to get a more holistic view of the stock by looking at: