Examining Legacy Reserves LP’s (NASDAQ:LGCY) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess LGCY’s latest performance announced on 31 December 2017 and weigh these figures against its longer term trend and industry movements. View our latest analysis for Legacy Reserves
How Well Did LGCY Perform?
For the purpose of this commentary, I like to use data from the most recent 12 months, 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 examine different companies on a similar basis, using new information. For Legacy Reserves, its most recent earnings (trailing twelve month) is -US$72.90M, which compared to the previous year’s figure, has become less negative. Given that these figures are fairly myopic, I’ve estimated an annualized five-year figure for LGCY’s earnings, which stands at -US$146.65M. This suggests that, though net income is negative, it has become less negative over the years.
We can further assess Legacy Reserves’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Legacy Reserves’s revenue growth has been relatively muted, with an annual growth rate of 1.93%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Eyeballing growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 26.82% in the prior twelve months, . This is a change from a volatile drop of -8.77% in the previous couple of years. This means any tailwind the industry is profiting from, Legacy Reserves has not been able to reap as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will happen in the future and when. The most useful step is to examine company-specific issues Legacy Reserves may be facing and whether management guidance has steadily been met in the past. You should continue to research Legacy Reserves to get a more holistic view of the stock by looking at:
- 1. Financial Health: Is LGCY’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 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.