For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Galilee Energy Limited (ASX:GLL) useful as an attempt to give more color around how Galilee Energy is currently performing. See our latest analysis for GLL
How GLL fared against its long-term earnings performance and its industry
I look at data from the most recent 12 months, 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 blend allows me to assess various companies in a uniform manner using new information. For Galilee Energy, the latest twelve-month earnings is A$4M, which compared to the previous year’s figure, has moved up by a significant 91.90%. Given that these figures may be fairly short-term, I’ve estimated an annualized five-year value for GLL’s net income, which stands at -A$5M. This means on average, Galilee Energy has been able to consistently grow its net income over the past couple of years as well.What’s the driver of this growth? Let’s see if it is merely owing to industry tailwinds, or if Galilee Energy has experienced some company-specific growth. In the last few years, Galilee Energy increased bottom-line, while its top-line declined, by successfully managing its costs. This brought about to a margin expansion and profitability over time. Viewing growth from a sector-level, the Australian oil, gas and consumable fuels industry has been growing average earnings growth of 57.50% over the previous twelve months, and a more subdued 3.66% over the past five years. This means that any uplift the industry is enjoying, Galilee Energy is able to amplify this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Galilee Energy gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Galilee Energy to get a more holistic view of the stock by looking at:
1. Financial Health: Is GLL’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 GLL 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 GLL 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.