Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Indago Energy Limited’s (ASX:INK) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. Check out our latest analysis for Indago Energy
Was INK’s recent earnings decline worse than the long-term trend and the industry?
To account for any quarterly or half-yearly updates, I use 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 allows me to analyze different companies on a similar basis, using new information. For Indago Energy, its most recent twelve-month earnings is -A$2.9M, which, relative to the prior year’s level, has become more negative. Given that these values may be fairly myopic, I’ve calculated an annualized five-year value for Indago Energy’s net income, which stands at -A$2.6M. This doesn’t seem to paint a better picture, since earnings seem to have consistently been getting more and more negative over time.
We can further examine Indago Energy’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 -45.34%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Inspecting growth from a sector-level, the Australian oil and gas industry has been enduring some headwinds over the prior year, 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 five years. This means while Indago Energy is currently loss-making, any near-term headwind the industry is experiencing, Indago Energy is less exposed compared to its peers.
What does this mean?
Though Indago Energy’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to envisage what will occur going forward, and when. The most insightful step is to assess company-specific issues Indago Energy may be facing and whether management guidance has regularly been met in the past. You should continue to research Indago Energy to get a better picture of the stock by looking at:
1. Financial Health: Is INK’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.