When Cross Timbers Royalty Trust’s (NYSE:CRT) announced its latest earnings (31 December 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Cross Timbers Royalty Trust’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not CRT actually performed well. Below is a quick commentary on how I see CRT has performed. View our latest analysis for Cross Timbers Royalty Trust
Did CRT perform worse than its track record and industry?
I prefer to 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 technique allows me to examine different companies on a similar basis, using the latest information. For Cross Timbers Royalty Trust, its latest trailing-twelve-month earnings is US$6.05M, which, relative to the prior year’s level, has plunged by -4.89%. Since these values may be somewhat nearsighted, I’ve calculated an annualized five-year value for Cross Timbers Royalty Trust’s net income, which stands at US$12.28M This doesn’t seem to paint a better picture, as earnings seem to have consistently been deteriorating over the longer term.
Why could this be happening? Well, let’s take a look at what’s going on with margins and if the whole industry is feeling the heat. Although revenue growth in the past couple of years, has been negative, earnings growth has been declining by even more, implying that Cross Timbers Royalty Trust has been growing its expenses. This hurts margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 23.39% over the past year, . This is a change from a volatile drop of -8.15% in the last few years. This suggests that, in the recent industry expansion, Cross Timbers Royalty Trust has not been able to reap as much as its industry peers.
What does this mean?
Cross Timbers Royalty Trust’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Typically companies that face a drawn out period of reduction in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and expansion. You should continue to research Cross Timbers Royalty Trust to get a more holistic view of the stock by looking at:
- Financial Health: Is CRT’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 CRT 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 CRT 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 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.