After reading Star Group LP.’s (NYSE:SGU) 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 pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Star Group’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for Star Group
Was SGU’s recent earnings decline indicative of a tough track record?
I look at data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This allows me to examine different stocks on a similar basis, using the latest information. For Star Group, its most recent earnings (trailing twelve month) is US$35.37M, which, relative to the prior year’s level, has declined by -21.59%. Given that these values may be fairly short-term, I have computed an annualized five-year figure for Star Group’s net income, which stands at US$30.04M This means that despite the fact that earnings declined from the prior year, over a longer period of time, Star Group’s earnings have been growing on average.What’s the driver of this growth? Let’s take a look at if it is only owing to an industry uplift, or if Star Group has experienced some company-specific growth. Over the last few years, Star Group expanded bottom-line, while its top-line fell, by successfully managing its costs. This brought about to a margin expansion and profitability over time. Looking at growth from a sector-level, the US gas utilities industry has been growing, albeit, at a subdued single-digit rate of 6.38% over the past twelve months, and 6.31% over the previous five years. This shows that whatever tailwind the industry is profiting from, Star Group 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 are profitable, but have capricious earnings, can have many factors influencing its business. I recommend you continue to research Star Group to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for SGU’s future growth? Take a look at our free research report of analyst consensus for SGU’s outlook.
- 2. Financial Health: Is SGU’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.
- 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.