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For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at ARC Resources Ltd’s (TSX:ARX) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. Check out our latest analysis for ARC Resources

Commentary On ARX’s Past Performance

For the most up-to-date info, I 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 allows me to assess various companies on a similar basis, using new information. For ARC Resources, its most recent earnings (trailing twelve month) is CA$388.90M, which, relative to last year’s figure, has increased by an impressive 93.19%. Given that these figures are fairly myopic, I have determined an annualized five-year figure for ARX’s net income, which stands at CA$168.48M This shows that, on average, ARC Resources has been able to increasingly improve its profits over the last few years as well.

What’s enabled this growth? Well, let’s take a look at if it is only attributable to industry tailwinds, or if ARC Resources has experienced some company-specific growth. Even though both top-line and bottom-line growth rates in the past couple of years, were, on average, negative, earnings were more so. While this has caused a margin contraction, it has lessened ARC Resources’s earnings contraction. Inspecting growth from a sector-level, the Canadian oil and gas industry has been growing its average earnings by double-digit 19.64% in the prior year, and a flatter -0.21% over the last five years. This means in the recent industry expansion, ARC Resources is able to leverage this to its advantage.

What does this mean?

ARC Resources’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as ARC Resources gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research ARC Resources to get a more holistic view of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for ARX’s future growth? Take a look at our free research report of analyst consensus for ARX’s outlook.

• 2. Financial Health: Is ARX’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.

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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.