Does Greenpower Energy Limited's (ASX:GPP) Past Performance Indicate A Weaker Future?

When Greenpower Energy Limited's (ASX:GPP) announced its latest earnings (31 December 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Greenpower Energy's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not GPP actually performed well. Below is a quick commentary on how I see GPP has performed. Check out our latest analysis for Greenpower Energy

How Did GPP's Recent Performance Stack Up Against Its Past?

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 allows me to assess different companies on a similar basis, using new information. For Greenpower Energy, its most recent earnings (trailing twelve month) is -AU$3.54M, which, relative to last year’s level, has become more negative. Since these figures are relatively short-term, I have computed an annualized five-year value for Greenpower Energy's earnings, which stands at -AU$1.91M. This doesn’t seem to paint a better picture, as earnings seem to have gradually been getting more and more negative over time.

We can further assess Greenpower Energy's loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Greenpower Energy has seen an annual decline in revenue of -58.49%, on average. This adverse movement is a driver of the company's inability to reach breakeven. Has the entire industry experienced this headwind? Scanning growth from a sector-level, the Australian oil and gas industry has been ramping up growth, more than doubling average earnings in the past year, and a more muted 9.24% over the previous five years. This means that whatever tailwind the industry is profiting from, Greenpower Energy has not been able to leverage it as much as its industry peers.

What does this mean?

Though Greenpower Energy's past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to predict what will occur going forward, and when. The most useful step is to assess company-specific issues Greenpower Energy may be facing and whether management guidance has dependably been met in the past. You should continue to research Greenpower Energy to get a more holistic view of the stock by looking at:

1. Financial Health: Is GPP’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. 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 trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.