Global Ship Lease Inc (NYSE:GSL): Should The Recent Earnings Drop Worry You?

After reading Global Ship Lease Inc's (NYSE:GSL) most recent earnings announcement (31 December 2017), I found it useful to look back at how the company has performed in the past 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 a crucial aspect. Below is a brief commentary on my key takeaways. See our latest analysis for Global Ship Lease

How Did GSL's Recent Performance Stack Up Against Its Past?

I look at 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 allows me to examine various companies in a uniform manner using the most relevant data points. For Global Ship Lease, its most recent earnings (trailing twelve month) is -US$77.33M, which, against the prior year's level, has become more negative. Given that these values are fairly nearsighted, I’ve estimated an annualized five-year figure for Global Ship Lease's earnings, which stands at -US$4.61M. This doesn’t seem to paint a better picture, since earnings seem to have gradually been getting more and more negative over time.

We can further assess Global Ship Lease's loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Global Ship Lease's revenue growth has been somewhat soft, with an annual growth rate of 1.10%, on average. The company's inability to breakeven has been aided by the relatively flat top-line in the past. Eyeballing growth from a sector-level, the US shipping industry has been growing, albeit, at a subdued single-digit rate of 2.84% in the past year, and a flatter 0.062% over the past five years. This means that whatever near-term headwind the industry is experiencing, it’s hitting Global Ship Lease harder than its peers.

What does this mean?

Global Ship Lease's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. With companies that are currently loss-making, it is always difficult to envisage what will occur going forward, and when. The most useful step is to assess company-specific issues Global Ship Lease may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Global Ship Lease to get a more holistic view of the stock by looking at:

• 1. Financial Health: Is GSL’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 GSL 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 GSL 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 31 December 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.