Did North Sea Energy Inc’s (CVE:NUK) Recent Earnings Growth Beat The Trend?
When North Sea Energy Inc (TSXV:NUK) released its most recent earnings update (30 September 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how North Sea Energy performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see NUK has performed. View our latest analysis for North Sea Energy
Did NUK beat its long-term earnings growth trend and its industry?
I look at the ‘latest twelve-month’ data, 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 technique allows me to analyze different companies in a uniform manner using the latest information. For North Sea Energy, its latest earnings (trailing twelve month) is -CA$1.37M, which, in comparison to last year’s figure, has become less negative. Given that these values are fairly nearsighted, I have created an annualized five-year figure for North Sea Energy’s earnings, which stands at -CA$5.37M. This means that, even though net income is negative, it has become less negative over the years.
We can further analyze North Sea Energy’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years North Sea Energy has seen an annual decline in revenue of -69.58%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Scanning growth from a sector-level, the Canadian oil and gas industry has been growing, albeit, at a muted single-digit rate of 3.57% over the previous year, and a flatter 0.46% over the previous five years. This means while North Sea Energy is presently unprofitable, any recent headwind the industry is facing, North Sea Energy is relatively better-cushioned than its peers.
What does this mean?
Though North Sea 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 examine company-specific issues North Sea Energy may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research North Sea Energy to get a more holistic view of the stock by looking at:
Financial Health: Is NUK’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.
Valuation: What is NUK 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 NUK is currently mispriced by the market.
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.
