Does South Sea Petroleum Holdings Limited's (HKG:76) Latest Financial Perfomance Look Strong?

For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on South Sea Petroleum Holdings Limited (SEHK:76) useful as an attempt to give more color around how South Sea Petroleum Holdings is currently performing. Check out our latest analysis for South Sea Petroleum Holdings

Were 76's earnings stronger than its past performances and the industry?

I look at data from the most recent 12 months, 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 method allows me to assess different companies in a uniform manner using the most relevant data points. For South Sea Petroleum Holdings, its most recent bottom-line (trailing twelve month) is -US$2.03M, which, relative to the prior year's figure, has become less negative. Given that these values are fairly nearsighted, I have calculated an annualized five-year figure for 76's net income, which stands at US$1.02M.

We can further assess South Sea Petroleum Holdings's loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years South Sea Petroleum Holdings has seen an annual decline in revenue of -8.28%, 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 HK electronic industry has been growing, albeit, at a unexciting single-digit rate of 8.55% over the prior year, and a substantial 13.10% over the past half a decade. This means though South Sea Petroleum Holdings is currently loss-making, it may have been aided by industry tailwinds, moving earnings into a more favorable position.

What does this mean?

South Sea Petroleum Holdings's track record can be a valuable insight into its earnings performance, but it certainly 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 South Sea Petroleum Holdings may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research South Sea Petroleum Holdings to get a better picture of the stock by looking at:

1. Financial Health: Is 76’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 31 December 2017. This may not be consistent with full year annual report figures.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

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.