When Legacy Reserves LP’s (NASDAQ:LGCY) announced its latest earnings (30 September 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Legacy Reserves’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not LGCY actually performed well. Below is a quick commentary on how I see LGCY has performed. View our latest analysis for Legacy Reserves
Did LGCY’s recent EPS Growth beat the long-term trend and the industry?
To account for any quarterly or half-yearly updates, I use 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 blend enables me to examine different stocks on a more comparable basis, using the latest information. Legacy Reserves’s latest earnings -$152.9M, which, in comparison to the prior year’s figure, has become less negative. Given that these values may be relatively short-term thinking, I’ve calculated an annualized five-year value for LGCY’s earnings, which stands at -$143.7M. This suggests that, Legacy Reserves has historically performed better than recently, although it seems like earnings are now heading back in the right direction again.
Additionally, we can examine Legacy Reserves’s loss by looking at what has been happening in the industry on top of within the company. First, I want to briefly look into the line items. Revenue growth over last few years has grown by a mere 2.86%. Since top-line growth is also pretty stale the key to profitability going forward would be controlling costs. Inspecting growth from a sector-level, the US oil, gas and consumable fuels industry has been growing its average earnings by double-digit 13.68% in the previous year, . This is a turnaround from a volatile drop of -7.90% in the previous few years. This means that, even though Legacy Reserves is currently running a loss, it may have only just benefited from the recent industry expansion, moving earnings towards to right direction.
What does this mean?
While past data is useful, it 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 insightful step is to assess company-specific issues Legacy Reserves may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Legacy Reserves to get a better picture of the stock by looking at:
1. Financial Health: Is LGCY’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. 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.