When Protean Energy Limited (ASX:POW) released its most recent earnings update (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 Protean 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 POW has performed. View our latest analysis for Protean Energy

Commentary On POW’s Past Performance

To account for any quarterly or half-yearly updates, 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 Protean Energy, its latest trailing-twelve-month earnings is -AU$5.71M, which, against the previous year’s figure, has become more negative. Since these figures may be somewhat nearsighted, I have computed an annualized five-year value for POW’s earnings, which stands at -AU$3.39M. This doesn’t look much better, as earnings seem to have steadily been getting more and more negative over time.

We can further assess Protean Energy’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Protean Energy has seen an annual decline in revenue of -4.14%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Looking at growth from a sector-level, the Australian electrical industry has been enduring some headwinds in the previous year, leading to an average earnings drop of -9.22%. This is a major change, given that the industry has been delivering a positive rate of 6.56%, on average, over the past half a decade. This means whatever near-term headwind the industry is facing, it’s hitting Protean Energy harder than its peers.

What does this mean?

Though Protean Energy’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to predict what will happen in the future and when. The most valuable step is to examine company-specific issues Protean Energy may be facing and whether management guidance has dependably been met in the past. You should continue to research Protean Energy to get a more holistic view of the stock by looking at: