Today I will examine Galilee Energy Limited’s (ASX:GLL) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of GLL’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. View our latest analysis for Galilee Energy
How GLL fared against its long-term earnings performance and its industry
I prefer 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 assess different companies in a uniform manner using the latest information. For Galilee Energy, its most recent earnings (trailing twelve month) is AU$6.32M, which, against last year’s level, has increased by more than double. Since these values are fairly short-term, I’ve determined an annualized five-year figure for GLL’s net income, which stands at -AU$3.46M This means that, generally, Galilee Energy has been able to steadily grow its bottom line over the past few years as well.What’s enabled this growth? Let’s take a look at if it is only owing to an industry uplift, or if Galilee Energy has experienced some company-specific growth. In the past few years, Galilee Energy expanded bottom-line, while its top-line fell, by efficiently controlling its costs. This has caused to a margin expansion and profitability over time. Scanning growth from a sector-level, the Australian oil and gas industry has been ramping up growth, more than doubling average earnings in the prior twelve months, and a solid 11.17% over the previous five years. This shows that any tailwind the industry is benefiting from, Galilee Energy has not been able to realize the gains unlike its average peer.
What does this mean?
Galilee Energy’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Galilee Energy has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Galilee Energy to get a more holistic view of the stock by looking at:
- 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.
- 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.
- 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.