Where Chinook Energy Inc (TSE:CKE) Stands In Earnings Growth Against Its Industry

Today I will take a look at Chinook Energy Inc’s (TSX:CKE) 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 CKE’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. See our latest analysis for Chinook Energy

Could CKE beat the long-term trend and outperform its industry?

I look at the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend enables me to analyze different stocks on a similar basis, using the most relevant data points. For Chinook Energy, its most recent earnings (trailing twelve month) is -CA$16.91M, which compared to last year’s figure, has become less negative. Since these figures may be somewhat short-term thinking, I have calculated an annualized five-year value for Chinook Energy’s earnings, which stands at -CA$51.44M. This shows that, while net income is negative, it has become less negative over the years.

TSX:CKE Income Statement Mar 15th 18
TSX:CKE Income Statement Mar 15th 18
We can further examine Chinook Energy’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Chinook Energy has seen an annual decline in revenue of -26.46%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Viewing growth from a sector-level, the Canadian oil and gas industry has been growing, albeit, at a subdued single-digit rate of 7.63% in the prior year, and a flatter -0.49% over the previous five years. This means although Chinook Energy is currently unprofitable, it may have only just gained from the recent industry expansion, moving earnings in the right direction.

What does this mean?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to envisage what will happen in the future and when. The most valuable step is to assess company-specific issues Chinook Energy may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Chinook Energy to get a more holistic view of the stock by looking at:

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