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Enagás SA.’s (BME:ENG) Earnings Grew 17.64%, Did It Beat Long-Term Trend?

In this commentary, I will examine Enagás SA.’s (BME:ENG) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the oil and gas industry performed. As an investor, I find it beneficial to assess ENG’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. View our latest analysis for Enagás

Did ENG beat its long-term earnings growth trend and its industry?

I look at 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 enables me to assess different companies on a more comparable basis, using new information. For Enagás, its most recent trailing-twelve-month earnings is €490.84M, which, in comparison to last year’s figure, has climbed up by 17.64%. Given that these figures may be relatively nearsighted, I have created an annualized five-year figure for Enagás’s earnings, which stands at €406.95M This shows that, on average, Enagás has been able to consistently grow its bottom line over the past few years as well.

BME:ENG Income Statement Apr 13th 18
BME:ENG Income Statement Apr 13th 18

What’s the driver of this growth? Let’s see if it is only due to industry tailwinds, or if Enagás has experienced some company-specific growth. Over the past couple of years, Enagás grew its bottom line faster than revenue by efficiently controlling its costs. This has led to a margin expansion and profitability over time. Inspecting growth from a sector-level, the ES oil and gas industry has been growing its average earnings by double-digit 33.54% in the past year, . This is a change from a volatile drop of -5.29% in the last couple of years. This suggests that, in the recent industry expansion, Enagás has not been able to leverage it as much as its industry peers.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Enagás to get a more holistic view of the stock by looking at:

  • 1. Future Outlook: What are well-informed industry analysts predicting for ENG’s future growth? Take a look at our free research report of analyst consensus for ENG’s outlook.

  • 2. Financial Health: Is ENG’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.

  • 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 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.

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