New West Energy Services Inc (TSXV:NWE): Does 7.9% EPS Drop In A Year Reflect The Long-Term Trend?
For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on New West Energy Services Inc (TSXV:NWE) useful as an attempt to give more color around how New West Energy Services is currently performing. See our latest analysis for NWE
Was NWE’s weak performance lately a part of a long-term decline?
For the most up-to-date info, 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 allows me to analyze many different companies in a uniform manner using new information. New West Energy Services’s latest twelve-month earnings -CA$2M, which, against the prior year’s level, has become more negative. Given that these figures are somewhat short-term thinking, I have determined an annualized five-year figure for NWE’s net income, which stands at -CA$1M. This doesn’t look much better, as earnings seem to have gradually been getting more and more negative over time.
Additionally, we can examine New West Energy Services’s loss by looking at what’s going on in the industry on top of within the company. Firstly, I want to quickly look into the line items. Revenue growth over past few years has been relatively muted, remaining flat on average at 0.09%. Since top-line growth is also pretty stale the key to profitability in the future would be controlling costs. Viewing growth from a sector-level, the Canadian energy equipment and services industry has been growing, albeit, at a subdued single-digit rate of 2.53% in the prior twelve months, . This is a turnaround from a volatile drop of -19.23% in the previous few years. This suggests that any recent the industry is experiencing, it’s hitting New West Energy Services harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will happen in the future and when. The most valuable step is to examine company-specific issues New West Energy Services may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research New West Energy Services to get a better picture of the stock by looking at:
1. Financial Health: Is NWE’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 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.
