Investors with a long-term horizong may find it valuable to assess Adams Resources & Energy Inc’s (AMEX:AE) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Adams Resources & Energy is currently performing. View our latest analysis for Adams Resources & Energy
Did AE beat its long-term earnings growth trend and its industry?
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This technique enables me to assess different stocks on a similar basis, using the latest information. For Adams Resources & Energy, its latest trailing-twelve-month earnings is -US$4.34M, which compared to the previous year’s level, has become less negative. Since these figures are relatively myopic, I’ve determined an annualized five-year value for AE’s net income, which stands at US$12.20M.
We can further evaluate Adams Resources & Energy’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Adams Resources & Energy has seen an annual decline in revenue of -11.45%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Looking at growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 21.26% in the prior year, . This is a change from a volatile drop of -8.05% in the previous couple of years. This means despite the fact that Adams Resources & Energy is currently unprofitable, it may have only just benefited from the recent industry expansion, moving earnings towards to right direction.
What does this mean?
Though Adams Resources & Energy’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to predict what will happen in the future and when. The most useful step is to assess company-specific issues Adams Resources & Energy may be facing and whether management guidance has steadily been met in the past. You should continue to research Adams Resources & Energy to get a more holistic view of the stock by looking at:
- 1. Financial Health: Is AE’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 AE 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 AE 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 trailing twelve months from 30 September 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.