Are Earnings Prospects Improving For Loss-Making Solo Oil Plc’s (LON:SOLO)?

Measuring Solo Oil Plc’s (AIM:SOLO) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess SOLO’s recent performance announced on 30 June 2017 and compare these figures to its historical trend and industry movements. See our latest analysis for Solo Oil

How Well Did SOLO Perform?

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 allows me to assess various companies on a more comparable basis, using the most relevant data points. For Solo Oil, its most recent bottom-line (trailing twelve month) is -£0.7M, which, against the prior year’s figure, has become less negative. Since these figures may be fairly nearsighted, I have estimated an annualized five-year figure for Solo Oil’s earnings, which stands at -£1.6M. This means even though net income is negative, it has become less negative over the years.

AIM:SOLO Income Statement Jan 3rd 18
AIM:SOLO Income Statement Jan 3rd 18
We can further analyze Solo Oil’s loss by researching what has been happening in the industry as well as within the company. Firstly, I want to quickly look into the line items. Revenue growth over the past few years has more than doubled, implying that Solo Oil is in a high-growth phase with expenses shooting ahead of high top-line growth rates, leading to yearly losses. Viewing growth from a sector-level, the UK oil and gas industry has been ramping up growth, more than doubling average earnings in the past year, . This is a a strong turnaround from a volatile drop of -28.32% in the past couple of years. This means whatever tailwind the industry is deriving benefit from, Solo Oil has not been able to gain as much as its average peer.

What does this mean?

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

1. Financial Health: Is SOLO’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 30 June 2017. This may not be consistent with full year annual report figures.