Examining how TERN plc (AIM:TERN) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how TERN is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its oil and gas industry peers. See our latest analysis for TERN
Was TERN’s weak performance lately a part of a long-term decline?
I prefer to use 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 technique allows me to analyze different companies in a uniform manner using new information. For TERN, its most recent bottom-line (trailing twelve month) is £0.3M, which, against the previous year’s figure, has fallen by a non-trivial -93.34%. Since these values may be somewhat short-term thinking, I have estimated an annualized five-year figure for TERN’s net income, which stands at -£0.1M. This shows that though earnings growth was negative against last year, over time, TERN’s profits have been increasing on average.How has it been able to do this? Let’s see whether it is solely because of industry tailwinds, or if TERN has seen some company-specific growth. In the last few years, TERN increased its bottom line faster than revenue by successfully controlling its costs. This has led to a margin expansion and profitability over time. Inspecting growth from a sector-level, the UK oil and gas industry has been growing growth, more than doubling average earnings over the past year, . This is a a solid turnaround from a volatile drop of -28.32% in the past couple of years. This suggests that, in the recent industry expansion, TERN has not been able to realize the gains unlike its average peer.
What does this mean?
Though TERN’s past data is helpful, it is only one aspect of my investment thesis. Companies are profitable, but have unpredictable earnings, can have many factors affecting its business. You should continue to research TERN to get a more holistic view of the stock by looking at:
1. Financial Health: Is TERN’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.