Analyzing Erin Energy Corporation’s (AMEX:ERN) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess ERN’s recent performance announced on 30 September 2017 and compare these figures to its long-term trend and industry movements. See our latest analysis for Erin Energy
Could ERN beat the long-term trend and outperform its industry?
I like to 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 method enables me to analyze different companies on a similar basis, using new information. For Erin Energy, its latest trailing-twelve-month earnings is -$203.1M, which, against last year’s level, has become less negative. Since these figures are relatively myopic, I have computed an annualized five-year value for Erin Energy’s earnings, which stands at -$139.8M. This shows that, Erin Energy has historically performed better than recently, while it seems like earnings are now heading back in the right direction again.
We can further analyze Erin Energy’s loss by researching what’s going on in the industry as well as within the company. First, I want to briefly look into the line items. Revenue growth over the last couple of years has risen by 18.15%, signalling that Erin Energy is in a high-growth period with expenses shooting ahead of elevated top-line growth rates, leading to yearly losses. Looking at growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 18.37% in the prior twelve months, . This is a turnaround from a volatile drop of -7.81% in the past couple of years. This means that, although Erin Energy is presently running a loss, it may have only just benefited from the recent industry expansion, moving earnings into a more favorable position.
What does this mean?
Erin 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 useful step is to assess company-specific issues Erin Energy may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Erin Energy to get a more holistic view of the stock by looking at:
1. Financial Health: Is ERN’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 ERN 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 ERN 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.