Did ECA Marcellus Trust I’s (NYSE:ECT) Recent Earnings Growth Beat The Trend?
After looking at ECA Marcellus Trust I’s (NYSE:ECT) latest earnings update (30 September 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. See our latest analysis for ECA Marcellus Trust I
How ECT fared against its long-term earnings performance and its industry
I like 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 enables me to examine various companies on a more comparable basis, using new information. For ECA Marcellus Trust I, its latest earnings (trailing twelve month) is $5.9M, which, relative to the previous year’s figure, has climbed up by a non-trivial 74.78%. Since these figures may be relatively myopic, I’ve calculated an annualized five-year figure for ECT’s net income, which stands at $21.9M. This suggests that, even though earnings increased from last year’s level, over the past couple of years, ECA Marcellus Trust I’s earnings have been falling on average.
Why could this be happening? Let’s examine what’s going on with margins and whether the entire industry is experiencing the hit as well. Although revenue growth in the last couple of years, has been negative, earnings growth has been falling by even more, suggesting that ECA Marcellus Trust I has been ramping up its expenses. This harms margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 18.47% over the previous twelve months, . This is a turnaround from a volatile drop of -7.52% in the last few years. This shows that, in the recent industry expansion, ECA Marcellus Trust I is capable of amplifying this to its advantage.
What does this mean?
ECA Marcellus Trust I’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be variables that are influencing the entire industry hence the high industry growth rate over the same time period. You should continue to research ECA Marcellus Trust I to get a better picture of the stock by looking at:
1. Financial Health: Is ECT’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 ECT 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 ECT 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 30 September 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.
