Does Hugoton Royalty Trust’s (NYSE:HGT) 143.63% Earnings Growth Reflect The Long-Term Trend?
Assessing Hugoton Royalty Trust’s (NYSE:HGT) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess HGT’s recent performance announced on 31 December 2017 and evaluate these figures to its long-term trend and industry movements. Check out our latest analysis for Hugoton Royalty Trust
Could HGT beat the long-term trend and outperform its industry?
I like to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique allows me to analyze many different companies in a uniform manner using the most relevant data points. For Hugoton Royalty Trust, its most recent bottom-line (trailing twelve month) is US$4.52M, which, against last year’s level, has risen by more than double. Since these figures may be fairly nearsighted, I have estimated an annualized five-year figure for HGT’s earnings, which stands at US$26.18M This means even though earnings growth from last year was positive, in the long run, Hugoton Royalty Trust’s earnings have been declining on average.
Why could this be happening? Well, let’s look at what’s transpiring with margins and whether the entire industry is facing the same headwind. Although revenue growth in the past few years, has been negative, earnings growth has been falling by even more, meaning Hugoton Royalty Trust has been growing its expenses. This harms margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 23.39% in the previous year, . This is a change from a volatile drop of -8.15% in the previous couple of years. This suggests that, in the recent industry expansion, Hugoton Royalty Trust is capable of leveraging this to its advantage.
What does this mean?
Hugoton Royalty Trust’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 may be variables that are impacting the entire industry thus the high industry growth rate over the same period of time. I suggest you continue to research Hugoton Royalty Trust to get a better picture of the stock by looking at:
Financial Health: Is HGT’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.
