Investors with a long-term horizong may find it valuable to assess VOC Energy Trust’s (NYSE:VOC) 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 VOC Energy Trust is currently performing. See our latest analysis for VOC Energy Trust
Did VOC’s recent earnings growth beat the long-term trend and the industry?
I like to use the ‘latest twelve-month’ data, 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 blend allows me to assess different companies on a more comparable basis, using the most relevant data points. For VOC Energy Trust, its most recent trailing-twelve-month earnings is $8.5M, which compared to the previous year’s figure, has jumped by an impressive 75.44%. Given that these values are somewhat nearsighted, I have estimated an annualized five-year value for VOC Energy Trust’s net income, which stands at $19.8M. This means that, while earnings increased from last year’s level, over the longer term, VOC Energy Trust’s earnings have been diminishing on average.
Why could this be happening? Let’s examine what’s transpiring with margins and if the entire industry is feeling the heat. Although revenue growth in the last few years, has been negative, earnings growth has been falling by even more, meaning VOC Energy Trust has been growing its expenses. This hurts margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 18.47% over the past twelve months, . This is a turnaround from a volatile drop of -7.52% in the last couple of years. This suggests that, in the recent industry expansion, VOC Energy Trust is able to leverage this to its advantage.
What does this mean?
Though VOC Energy 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 may be variables that are influencing the industry as a whole, thus the high industry growth rate over the same time period. You should continue to research VOC Energy Trust to get a more holistic view of the stock by looking at:
1. Financial Health: Is VOC’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 VOC 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 VOC 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.