After reading Genesis Energy Limited’s (NZSE:GNE) most recent earnings announcement (31 December 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. View our latest analysis for Genesis Energy
Was GNE’s weak performance lately a part of a long-term decline?
I like to use data from the most recent 12 months, 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 technique allows me to examine different stocks on a more comparable basis, using the latest information. For Genesis Energy, its latest earnings (trailing twelve month) is NZ$109.70M, which compared to the prior year’s figure, has dropped by a non-trivial -40.93%. Given that these figures may be somewhat short-term thinking, I’ve created an annualized five-year figure for Genesis Energy’s net income, which stands at NZ$89.41M This shows that while earnings growth was negative against the previous year, in the long run, Genesis Energy’s earnings have been growing on average.
How has it been able to do this? Let’s see if it is solely attributable to industry tailwinds, or if Genesis Energy has seen some company-specific growth. In the past few years, Genesis Energy expanded its bottom line faster than revenue by successfully controlling its costs. This has caused a margin expansion and profitability over time. Viewing growth from a sector-level, the NZ electric utilities industry has been growing its average earnings by double-digit 14.98% in the prior twelve months, . This is a turnaround from a volatile drop of -5.56% in the previous few years. This shows that, in the recent industry expansion, Genesis Energy has not been able to realize the gains unlike its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies are profitable, but have volatile earnings, can have many factors influencing its business. I recommend you continue to research Genesis Energy to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for GNE’s future growth? Take a look at our free research report of analyst consensus for GNE’s outlook.
- 2. Financial Health: Is GNE’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.
- 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 31 December 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.