Assessing Genesis Energy LP’s (NYSE:GEL) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess GEL’s latest performance announced on 31 March 2018 and evaluate these figures to its historical trend and industry movements. Check out our latest analysis for Genesis Energy
Did GEL perform worse than its track record and industry?GEL’s trailing twelve-month earnings (from 31 March 2018) of US$24.71m has more than halved from US$113.25m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 14.17%, indicating the rate at which GEL is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and whether the rest of the industry is feeling the heat.
In the past few years, revenue growth has failed to keep up with earnings, which suggests that Genesis Energy’s bottom line has been driven by unsustainable cost-cutting. Looking at growth from a sector-level, the US oil and gas industry has been growing its average earnings by double-digit 25.04% in the previous year, . This is a turnaround from a volatile drop of -5.08% in the past couple of years. This suggests that, in the recent industry expansion, Genesis Energy has not been able to realize the gains unlike its industry peers.In terms of returns from investment, Genesis Energy has not invested its equity funds well, leading to a 2.33% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 3.11% is below the US Oil and Gas industry of 6.14%, indicating Genesis Energy’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Genesis Energy’s debt level, has declined over the past 3 years from 3.40% to 0.65%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 108.07% to 138.16% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. In some cases, companies that face a drawn out period of reduction in earnings are undergoing some sort of reinvestment phase in order to keep up with the latest industry disruption and expansion. I suggest you continue to research Genesis Energy to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for GEL’s future growth? Take a look at our free research report of analyst consensus for GEL’s outlook.
- Financial Health: Is GEL’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.
- 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.