Today I will take a look at Enduro Royalty Trust’s (NYSE:NDRO) most recent earnings update (30 September 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the oil and gas industry performed. As an investor, I find it beneficial to assess NDRO’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for Enduro Royalty Trust
Could NDRO beat the long-term trend and outperform its industry?
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 method enables me to assess many different companies on a similar basis, using the most relevant data points. For Enduro Royalty Trust, its most recent earnings (trailing twelve month) is US$9.87M, which, relative to the previous year’s figure, has risen by a relatively unexciting 2.91%. Given that these values may be relatively nearsighted, I have computed an annualized five-year value for Enduro Royalty Trust’s earnings, which stands at US$27.62M This suggests that, though earnings growth from last year was positive, in the long run, Enduro Royalty Trust’s earnings have been declining on average.
Why could this be happening? Let’s examine what’s occurring with margins and whether the rest of the industry is experiencing the hit as well. Although revenue growth over the last couple of years, has been negative, earnings growth has been falling by even more, implying that Enduro Royalty Trust has been increasing its expenses. This harms margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 21.26% over the previous twelve months, . This is a turnaround from a volatile drop of -8.05% in the last couple of years. This means in the recent industry expansion, Enduro Royalty Trust has not been able to reap as much as its average peer.
What does this mean?
Though Enduro Royalty Trust’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 could be variables that are affecting the industry as a whole, thus the high industry growth rate over the same time period. I recommend you continue to research Enduro Royalty Trust to get a better picture of the stock by looking at:
- 1. Financial Health: Is NDRO’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 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.