After reading Houston American Energy Corp’s (AMEX:HUSA) most recent earnings announcement (30 September 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Houston American Energy’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. Check out our latest analysis for Houston American Energy
Was HUSA’s recent earnings decline indicative of a tough track record?
I prefer to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend enables me to assess various companies in a uniform manner using the most relevant data points. For Houston American Energy, its most recent twelve-month earnings is -$3.2M, which compared to the previous year’s figure, has become more negative. Given that these values may be fairly nearsighted, I’ve estimated an annualized five-year figure for HUSA’s net income, which stands at -$8.0M. This means that, while net income is negative, it has become less negative over the years.
We can further analyze Houston American Energy’s loss by looking at what has been happening in the industry as well as within the company. Firstly, I want to quickly look into the line items. Revenue growth over the last few years has been negative at -64.34%. The key to profitability here is to make sure the company’s cost growth is well-managed. Scanning growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 17.75% in the past twelve months, . This is a change from a volatile drop of -7.15% in the past couple of years. This means whatever uplift the industry is profiting from, Houston American Energy has not been able to reap as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to envisage what will occur going forward, and when. The most insightful step is to assess company-specific issues Houston American Energy may be facing and whether management guidance has dependably been met in the past. You should continue to research Houston American Energy to get a more holistic view of the stock by looking at:
1. Financial Health: Is HUSA’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.