When Alliance Holdings GP LP. (NASDAQ:AHGP) announced its most recent earnings (31 December 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 Alliance Holdings GP 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 AHGP has performed. View our latest analysis for Alliance Holdings GP
How Well Did AHGP Perform?
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 blend allows me to assess various companies on a more comparable basis, using the most relevant data points. For Alliance Holdings GP, its latest trailing-twelve-month earnings is US$185.99M, which compared to the prior year’s level, Since these figures may be fairly short-term, I have determined an annualized five-year figure for Alliance Holdings GP’s earnings, which stands at US$215.93M This suggests that Alliance Holdings GP’s average annual net income has traditionally been larger, which signifies a downward trend in the bottom line.
Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the whole industry is facing the same headwind. Revenue growth over the last couple of years, has been positive, however earnings growth has been declining. This implies that Alliance Holdings GP has been ramping up expenses, which is harming margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 18.74% over the past year, . This is a turnaround from a volatile drop of -8.11% in the last couple of years. This suggests that, in the recent industry expansion, Alliance Holdings GP has not been able to leverage it as much as its industry peers.
What does this mean?
Though Alliance Holdings GP’s past data is helpful, it is only one aspect of my investment thesis. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There may be factors that are affecting the industry as a whole, hence the high industry growth rate over the same time frame. You should continue to research Alliance Holdings GP to get a better picture of the stock by looking at:
- 1. Financial Health: Is AHGP’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.
- 2. Valuation: What is AHGP worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether AHGP is currently mispriced by the market.
- 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.