Assessing Santos Limited’s (ASX:STO) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Santos is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its oil and gas industry peers. See our latest analysis for Santos
Did STO’s recent earnings growth beat the long-term trend and the industry?STO is loss-making, with the most recent trailing twelve-month earnings of -AU$360.00m (from 31 December 2017), which compared to last year has become less negative. However, the company’s loss seem to be contracting over the medium term, with the five-year earnings average of -AU$336.07m. Each year, for the past five years STO has seen an annual decline in revenue of -1.55%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Eyeballing growth from a sector-level, the Australian oil and gas industry has been increasing growth, more than doubling average earnings over the past twelve months, and a substantial 11.17% over the past half a decade. This suggests that whatever tailwind the industry is benefiting from, Santos has not been able to leverage it as much as its average peer.
Although Santos is loss-making, it has an ample cash cushion (AU$1.23b) to pay for its upcoming operating expenses over the next couple of years. This is a strong indication of good cash management.
What does this mean?
Santos’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most valuable step is to examine company-specific issues Santos may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Santos to get a better picture 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.