For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Nuverra Environmental Solutions Inc (AMEX:NES) useful as an attempt to give more color around how Nuverra Environmental Solutions is currently performing. See our latest analysis for Nuverra Environmental Solutions
Did NES beat its long-term earnings growth trend and its industry?
I prefer to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique enables me to assess many different companies on a similar basis, using the latest information. For Nuverra Environmental Solutions, its most recent bottom-line (trailing twelve month) is -US$78.31M, which, in comparison to last year’s level, has become less negative. Given that these figures may be somewhat short-term thinking, I’ve calculated an annualized five-year figure for NES’s net income, which stands at -US$144.84M. This suggests that, though net income is negative, it has become less negative over the years.
We can further examine Nuverra Environmental Solutions’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Nuverra Environmental Solutions’s top-line has risen by a mere 3.82%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Scanning growth from a sector-level, the US energy services industry has been growing its average earnings by double-digit 28.11% over the previous year, . This is a turnaround from a volatile drop of -18.64% in the past few years. This shows that, although Nuverra Environmental Solutions is currently unprofitable, it may have only just been aided by the recent industry expansion, moving earnings towards to right direction.
What does this mean?
Though Nuverra Environmental Solutions’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to envisage what will happen in the future and when. The most insightful step is to assess company-specific issues Nuverra Environmental Solutions may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Nuverra Environmental Solutions to get a better picture of the stock by looking at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.
- 1. Financial Health: Is NES’s operations financially sustainable? Balance sheets can be hard to analyze, which is why Simply Wall St does it for you. Check out important financial health checks here.
- 2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore a 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.