Today I will take a look at Santos Limited’s (ASX:STO) most recent earnings update (31 December 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the oil and gas industry performed. As an investor, I find it beneficial to assess STO’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. Check out our latest analysis for Santos
How Well Did STO Perform?
I look at the ‘latest twelve-month’ data, 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 allows me to assess different companies in a uniform manner using new information. For Santos, its latest trailing-twelve-month earnings is -US$360.00M, which, in comparison to the prior year’s level, has become less negative. Since these figures are fairly short-term thinking, I’ve estimated an annualized five-year value for Santos’s net income, which stands at -US$336.07M. This means Santos has historically performed better than recently, even though it seems like earnings are now heading back in the right direction again.We can further evaluate Santos’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Santos’s revenue growth has been relatively muted, with an annual growth rate of -1.55%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Scanning growth from a sector-level, the Australian oil and gas industry has been growing growth, more than doubling average earnings in the previous twelve months, and a strong 13.22% over the past five years. This shows that any tailwind the industry is benefiting from, Santos has not been able to leverage it as much as its average peer.
What does this mean?
Though Santos’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to envisage what will happen in the future and when. The most insightful step is to examine company-specific issues Santos may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Santos to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for STO’s future growth? Take a look at our free research report of analyst consensus for STO’s outlook.
- Financial Health: Is STO’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.