When San Juan Basin Royalty Trust (NYSE:SJT) announced its most recent earnings (31 March 2018), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how San Juan Basin Royalty Trust performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see SJT has performed. View our latest analysis for San Juan Basin Royalty Trust
Commentary On SJT’s Past Performance
To account for any quarterly or half-yearly updates, I 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 blend allows me to assess many different companies in a uniform manner using the most relevant data points. For San Juan Basin Royalty Trust, its latest earnings (trailing twelve month) is US$37.21M, which, against the previous year’s figure, has climbed up by a substantial 83.40%. Given that these figures are fairly short-term thinking, I’ve determined an annualized five-year value for SJT’s earnings, which stands at US$38.43M This suggests that, despite the fact that earnings growth from last year was positive, over the long run, San Juan Basin Royalty Trust’s earnings have been deteriorating on average.
What could be happening here? Let’s examine what’s occurring with margins and if the rest of the industry is facing the same headwind. Over the last couple of years, San Juan Basin Royalty Trust has, on average, delivered negative top- and bottom-line growth. As revenues fell by more, expenses have been lowered in order to maintain margins – not the most sustainable operating activity. Scanning growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 25.00% over the prior twelve months, . This is a change from a volatile drop of -4.96% in the last few years. This means that, in the recent industry expansion, San Juan Basin Royalty Trust is capable of leveraging this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There could 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 San Juan Basin Royalty Trust to get a better picture of the stock by looking at:
- Financial Health: Is SJT’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.
- Valuation: What is SJT 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 SJT is currently mispriced by the market.
- 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 March 2018. 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.