When Energy Technologies Limited (ASX:EGY) announced its most recent earnings (31 December 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Energy Technologies performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see EGY has performed. See our latest analysis for Energy Technologies

Was EGY weak performance lately part of a long-term decline?

I use 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 technique enables me to analyze different companies on a similar basis, using the latest information. For Energy Technologies, its most recent earnings (trailing twelve month) is -AU$2.70M, which, in comparison to the prior year’s figure, has become more negative. Given that these values may be relatively myopic, I have calculated an annualized five-year figure for Energy Technologies’s net income, which stands at -AU$2.33M. This doesn’t seem to paint a better picture, as earnings seem to have consistently been getting more and more negative over time.

We can further examine Energy Technologies’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Energy Technologies’s top-line has risen by 21.03% on average, implying that the company is in a high-growth phase with expenses shooting ahead of revenues, leading to annual losses. Looking at growth from a sector-level, the Australian electrical industry has been enduring some headwinds over the previous twelve months, leading to an average earnings drop of -3.23%. This is a major change, given that the industry has been delivering a positive rate of 6.56%, on average, over the past five years. This means whatever recent headwind the industry is enduring, it’s hitting Energy Technologies harder than its peers.

What does this mean?

Though Energy Technologies’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to envisage what will happen in the future and when. The most valuable step is to examine company-specific issues Energy Technologies may be facing and whether management guidance has consistently been met in the past. You should continue to research Energy Technologies to get a better picture of the stock by looking at: