Should Victoria Oil & Gas Plc’s (LON:VOG) Recent Earnings Decline Worry You?
Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Victoria Oil & Gas Plc’s (AIM:VOG) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. View our latest analysis for Victoria Oil & Gas
Was VOG’s recent earnings decline worse than the long-term trend and the industry?
I 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 technique allows me to assess different companies in a uniform manner using the latest information. For Victoria Oil & Gas, its latest trailing-twelve-month earnings is -US$36.62M, which, relative to the prior year’s level, has become more negative. Since these figures are fairly short-term thinking, I’ve created an annualized five-year value for Victoria Oil & Gas’s earnings, which stands at -US$18.40M. This doesn’t look much better, since earnings seem to have consistently been getting more and more negative over time.
We can further assess Victoria Oil & Gas’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Victoria Oil & Gas’s top-line has grown by 37.13% on average, signalling that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Inspecting growth from a sector-level, the UK oil and gas industry has been growing its average earnings by double-digit 46.37% in the previous twelve months, and a more muted 2.97% over the previous five years. This shows that any uplift the industry is profiting from, Victoria Oil & Gas has not been able to gain as much as its average peer.
What does this mean?
Victoria Oil & Gas’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always hard to envisage what will occur going forward, and when. The most insightful step is to examine company-specific issues Victoria Oil & Gas may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Victoria Oil & Gas to get a more holistic view of the stock by looking at:
Financial Health: Is VOG’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 VOG 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 VOG 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 30 June 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.
