When Frontera Resources Corporation (AIM:FRR) announced its most recent earnings (30 June 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Frontera Resources has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see FRR has performed. See our latest analysis for Frontera Resources
Commentary On FRR’s Past Performance
I prefer to use 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 blend allows me to assess different stocks in a uniform manner using the latest information. For Frontera Resources, its latest earnings is -$24.1M, which, against the prior year’s figure, has become less negative. Since these values may be fairly short-term thinking, I have created an annualized five-year figure for FRR’s net income, which stands at -$37.1M. This means despite the fact that net income is negative, it has become less negative over the years.
Additionally, we can examine Frontera Resources’s loss by looking at what has been happening in the industry as well as within the company. Initially, I want to briefly look into the line items. Revenue growth over the past couple of years has been negative at -16.27%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Inspecting growth from a sector-level, the UK oil and gas industry has been increasing growth, more than doubling average earnings in the previous year, . This is a a notable change from a volatile drop of -28.32% in the past couple of years. This shows that whatever tailwind the industry is benefiting from, Frontera Resources has not been able to reap as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always hard to envisage what will occur going forward, and when. The most valuable step is to assess company-specific issues Frontera Resources may be facing and whether management guidance has dependably been met in the past. You should continue to research Frontera Resources to get a better picture of the stock by looking at:
1. Financial Health: Is FRR’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.