In This Article:
In this article, I will take a look at Black Star Petroleum Limited’s (ASX:BSP) most recent earnings update (31 December 2017) and compare these latest figures against its performance over the past few years, along with how the rest of BSP’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. View our latest analysis for Black Star Petroleum
Were BSP’s earnings stronger than its past performances and the industry?
To account for any quarterly or half-yearly updates, I use 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 enables me to assess various companies on a similar basis, using the most relevant data points. For Black Star Petroleum, its latest earnings (trailing twelve month) is -AU$169.17K, which, against the prior year’s level, has become less negative. Given that these values are relatively nearsighted, I have calculated an annualized five-year figure for Black Star Petroleum’s earnings, which stands at -AU$3.84M. This suggests that, while net income is negative, it has become less negative over the years.
We can further analyze Black Star Petroleum’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Black Star Petroleum has seen an annual decline in revenue of -67.45%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Eyeballing growth from a sector-level, the Australian oil and gas industry has been multiplying growth, more than doubling average earnings in the prior year, and a solid 13.22% over the past five years. This means that any uplift the industry is benefiting from, Black Star Petroleum has not been able to leverage it as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to envisage what will happen in the future and when. The most useful step is to assess company-specific issues Black Star Petroleum may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Black Star Petroleum to get a more holistic view of the stock by looking at: