Does Birchcliff Energy Ltd’s (TSE:BIR) 15.6% Earnings Decline Reflect A Long-Term Trend?
For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Birchcliff Energy Ltd (TSX:BIR) useful as an attempt to give more color around how Birchcliff Energy is currently performing. View our latest analysis for Birchcliff Energy
Despite a decline, did BIR underperform the long-term trend and the industry?
For the most up-to-date info, I use the ‘latest twelve-month’ data, 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 different companies in a uniform manner using new information. For Birchcliff Energy, its most recent bottom-line is -CA$64.7M, which, relative to last year’s level, has become more negative. Given that these figures may be relatively short-term, I’ve calculated an annualized five-year value for Birchcliff Energy’s net income, which stands at CA$27.3M.
Additionally, we can analyze Birchcliff Energy’s loss by researching what’s going on in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last couple of years has risen by 10.45%, implying that Birchcliff Energy is in a high-growth phase with expenses racing ahead high top-line growth rates, leading to yearly losses. Inspecting growth from a sector-level, the Canadian oil and gas industry has been growing its average earnings by double-digit 10.13% over the prior twelve months, and a flatter 0.38% over the past five. This means that whatever uplift the industry is deriving benefit from, Birchcliff Energy has not been able to gain as much as its industry peers.
What does this mean?
Birchcliff Energy’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will occur going forward, and when. The most valuable step is to assess company-specific issues Birchcliff Energy may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Birchcliff Energy to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for BIR’s future growth? Take a look at our free research report of analyst consensus for BIR’s outlook.
2. Financial Health: Is BIR’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.
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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.
