For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Frontera Energy Corporation (TSX:FEC) useful as an attempt to give more color around how Frontera Energy is currently performing. View our latest analysis for Frontera Energy
How Did FEC’s Recent Performance Stack Up Against Its Past?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, 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 method allows me to assess many different companies on a similar basis, using the latest information. For Frontera Energy, its latest trailing-twelve-month earnings is -US$216.70M, which, relative to the previous year’s level, has turned from positive to negative. Given that these values may be somewhat nearsighted, I’ve determined an annualized five-year figure for Frontera Energy’s earnings, which stands at -US$421.82M. This suggests that, while net income is negative, it has become less negative over the years.We can further examine Frontera 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 Frontera Energy has seen an annual decline in revenue of -11.96%, 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 Canadian oil and gas industry has been growing, albeit, at a muted single-digit rate of 3.57% in the previous year, and a flatter 0.46% over the past five. This means that any recent headwind the industry is enduring, it’s hitting Frontera Energy harder than its peers.
What does this mean?
Though Frontera Energy’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most useful step is to examine company-specific issues Frontera Energy may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Frontera Energy to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FEC’s future growth? Take a look at our free research report of analyst consensus for FEC’s outlook.
- Financial Health: Is FEC’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.