After looking at Sabine Royalty Trust’s (NYSE:SBR) latest earnings update (30 September 2017), I found it helpful to revisit the company’s performance in the past couple of years 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 an important aspect. In this article I briefly touch on my key findings. View our latest analysis for Sabine Royalty Trust
How Did SBR’s Recent Performance Stack Up Against Its Past?
For the most up-to-date info, I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to examine many different companies on a similar basis, using the most relevant data points. For Sabine Royalty Trust, the most recent twelve-month earnings is $33M, which compared to the prior year’s figure, has jumped up by 12.41%. Given that these values are somewhat myopic, I have determined an annualized five-year value for SBR’s earnings, which stands at $50M. This means that, even though earnings growth from last year was positive, in the long run, Sabine Royalty Trust’s earnings have been falling on average.
Why could this be happening? Let’s examine what’s occurring with margins and if the whole industry is facing the same headwind. Although revenue growth over the past couple of years, has been negative, earnings growth has been declining by even more, suggesting that Sabine Royalty Trust has been increasing its expenses. This hurts margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the US oil, gas and consumable fuels industry has been growing, albeit, at a muted single-digit rate of 3.71% in the past year, . This is a change from a volatile drop of -10.80% in the previous few years. This means whatever near-term headwind the industry is facing, Sabine Royalty Trust is less exposed compared to its peers.
What does this mean?
Though Sabine 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.
I recommend you continue to research Sabine Royalty Trust to get a better picture of the stock by looking at:
1. Financial Health: Is SBR’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 SBR 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 SBR 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 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.