Examining Marenica Energy Limited’s (ASX:MEY) 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 MEY’s latest performance announced on 30 June 2017 and weight these figures against its longer term trend and industry movements. View our latest analysis for Marenica Energy
How Well Did MEY Perform?
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 method enables me to assess many different companies on a more comparable basis, using the latest information. For Marenica Energy, its most recent earnings is -A$1.7M, which compared to the previous year’s figure, has become more negative. Since these values may be somewhat short-term, I have estimated an annualized five-year figure for Marenica Energy’s net income, which stands at -A$2.7M. This means though net income is negative, it has become less negative over the years.
We can further evaluate Marenica Energy’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 last couple of years has more than doubled, signalling that Marenica Energy is in a high-growth phase with expenses shooting ahead of high top-line growth rates, leading to yearly losses. Inspecting growth from a sector-level, the Australian oil and gas industry has been enduring some headwinds over the previous 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 robust growth of 28.17% in the previous five years. This means that despite the fact that Marenica Energy is presently unprofitable, whatever recent headwind the industry is facing, the impact on Marenica Energy has been softer relative to its peers.
What does this mean?
Marenica Energy’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most valuable step is to examine company-specific issues Marenica Energy may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Marenica Energy to get a more holistic view of the stock by looking at: