When Grand Gulf Energy Limited (ASX:GGE) announced its most recent earnings (31 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Grand Gulf Energy has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see GGE has performed. Check out our latest analysis for Grand Gulf Energy

Did GGE’s recent earnings growth beat the long-term trend and the industry?

To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, 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 examine many different companies in a uniform manner using the most relevant data points. For Grand Gulf Energy, its latest earnings (trailing twelve month) is -AU$1.09M, which, in comparison to the prior year’s figure, has become less negative. Given that these figures are relatively myopic, I have calculated an annualized five-year value for GGE’s net income, which stands at -AU$1.06M. This means that, Grand Gulf Energy has historically performed better than recently, despite the fact that it seems like earnings are now heading back in the right direction again.

We can further assess Grand Gulf Energy’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Grand Gulf Energy’s top-line has increased by a mere 6.98%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Scanning growth from a sector-level, the Australian oil and gas industry has been growing growth, more than doubling average earnings over the past year, and a strong 10.94% over the past five years. This means whatever tailwind the industry is profiting from, Grand Gulf Energy has not been able to gain as much as its industry peers.

What does this mean?

Grand Gulf Energy’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always hard to envisage what will happen in the future and when. The most useful step is to assess company-specific issues Grand Gulf Energy may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Grand Gulf Energy to get a more holistic view of the stock by looking at: