When ECA Marcellus Trust I (NYSE:ECT) announced its most recent earnings (31 March 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well ECA Marcellus Trust I has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see ECT has performed. Check out our latest analysis for ECA Marcellus Trust I
Did ECT beat its long-term earnings growth trend and its industry?
I like 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 method enables me to examine many different companies on a similar basis, using the most relevant data points. For ECA Marcellus Trust I, its most recent trailing-twelve-month earnings is US$5.26M, which compared to the prior year’s level, has climbed up by 15.50%. Since these values are fairly myopic, I have created an annualized five-year figure for ECA Marcellus Trust I’s net income, which stands at US$20.40M This suggests that, although earnings increased from last year’s level, over a longer period of time, ECA Marcellus Trust I’s earnings have been declining on average.
What could be happening here? Well, let’s look at what’s going on with margins and whether the whole industry is experiencing the hit as well. Although revenue growth over the past few years, has been negative, earnings growth has been declining by even more, suggesting that ECA Marcellus Trust I has been ramping up its expenses. This hurts margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 25.00% in the previous year, . This is a change from a volatile drop of -5.62% in the past few years. This suggests that, in the recent industry expansion, ECA Marcellus Trust I has not been able to gain as much as its industry peers.
What does this mean?
Though ECA Marcellus Trust I’s past data is helpful, it is only one aspect of my investment thesis. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There may be factors that are affecting the industry as a whole, hence the high industry growth rate over the same time period. I recommend you continue to research ECA Marcellus Trust I to get a more holistic view of the stock by looking at:
- Financial Health: Is ECT’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 ECT 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 ECT 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.