For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on SandRidge Permian Trust (NYSE:PER) useful as an attempt to give more color around how SandRidge Permian Trust is currently performing. Check out our latest analysis for SandRidge Permian Trust
How Well Did PER Perform?
I like to use data from the most recent 12 months, 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 many different companies in a uniform manner using new information. For SandRidge Permian Trust, the latest twelve-month earnings is $26.4M, which, against last year’s level, has plunged by -7.29%. Since these values may be relatively nearsighted, I have computed an annualized five-year figure for PER’s earnings, which stands at $83.5M. This doesn’t seem to paint a better picture, since earnings seem to have gradually been declining over the longer term.
Why is this? Let’s examine what’s going on with margins and if the whole industry is experiencing the hit as well. Over the last couple of years, SandRidge Permian Trust has, on average, delivered negative top- and bottom-line growth. As revenues fell by more, expenses have been cut in order to maintain margins – not the most sustainable operating activity. Eyeballing growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 17.23% over the past twelve months, . This is a turnaround from a volatile drop of -7.47% in the last couple of years. This means that, in the recent industry expansion, SandRidge Permian Trust has not been able to gain as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that experience an extended period of decline in earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry growth and disruption. I recommend you continue to research SandRidge Permian Trust to get a more holistic view of the stock by looking at:
1. Financial Health: Is PER’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. Valuation: What is PER 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 PER is currently mispriced by the market.
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 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.