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After reading Mexco Energy Corporation’s (AMEX:MXC) most recent earnings announcement (31 December 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Mexco Energy’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. Check out our latest analysis for Mexco Energy
Did MXC beat its long-term earnings growth trend and its industry?
For the most up-to-date info, I 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 enables me to assess various companies on a more comparable basis, using the latest information. For Mexco Energy, its most recent earnings (trailing twelve month) is -US$589.40K, which, relative to last year’s level, has become less negative. Since these values are relatively myopic, I’ve computed an annualized five-year value for MXC’s net income, which stands at -US$715.76K. This means while net income is negative, it has become less negative over the years.
We can further examine Mexco Energy’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Mexco Energy has seen an annual decline in revenue of -5.49%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 25.00% in the prior twelve months, . This is a change from a volatile drop of -5.41% in the last few years. This suggests that, while Mexco Energy is currently running a loss, it may have only just gained from the recent industry expansion, moving earnings in the right direction.
What does this mean?
Though Mexco Energy’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to predict what will occur going forward, and when. The most valuable step is to examine company-specific issues Mexco Energy may be facing and whether management guidance has regularly been met in the past. You should continue to research Mexco Energy to get a more holistic view of the stock by looking at:
Financial Health: Is MXC’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.
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.