Where Regal Petroleum plc's (LON:RPT) Earnings Growth Stands Against Its Industry

After looking at Regal Petroleum plc's (AIM:RPT) latest earnings update (30 June 2017), I found it helpful to revisit the company's performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. See our latest analysis for Regal Petroleum

Did RPT perform worse than its track record and industry?

For the purpose of this commentary, I like to use 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 technique allows me to examine many different companies on a similar basis, using the most relevant data points. For Regal Petroleum, its most recent trailing-twelve-month earnings is -US$661.00K, which compared to last year’s level, has turned from positive to negative. Since these figures may be relatively myopic, I have estimated an annualized five-year value for Regal Petroleum's net income, which stands at -US$20.33M. This means that, even though net income is negative, it has become less negative over the years.

We can further assess Regal Petroleum's loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Regal Petroleum has seen an annual decline in revenue of -6.70%, 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 UK oil and gas industry has been ramping up growth, more than doubling average earnings over the prior year, and a flatter 1.91% over the previous five years. This shows that whatever uplift the industry is profiting from, Regal Petroleum has not been able to realize the gains unlike its industry peers.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to forecast what will occur going forward, and when. The most valuable step is to assess company-specific issues Regal Petroleum may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Regal Petroleum to get a more holistic view of the stock by looking at:

• 1. Financial Health: Is RPT’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 RPT 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 RPT 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 30 June 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.