After reading Sinopec Oilfield Service Corporation’s (SEHK:1033) latest earnings update (31 March 2018), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether 1033 has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. See our latest analysis for Sinopec Oilfield Service

How Well Did 1033 Perform?

I prefer to 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 blend enables me to analyze different companies in a uniform manner using the latest information. For Sinopec Oilfield Service, its most recent bottom-line (trailing twelve month) is -CN¥9.21B, which compared to the previous year’s figure, has become less negative. Since these figures are fairly short-term thinking, I have created an annualized five-year figure for 1033’s net income, which stands at -CN¥3.63B. This suggests that, Sinopec Oilfield Service has historically performed better than recently, even though it seems like earnings are now heading back towards to right direction again.

We can further assess Sinopec Oilfield Service’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Sinopec Oilfield Service has seen an annual decline in revenue of -3.44%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the HK energy services industry has been increasing growth, more than doubling average earnings over the prior twelve months, . This is a a substantial change from a volatile drop of -20.19% in the past couple of years. This means whatever uplift the industry is benefiting from, Sinopec Oilfield Service has not been able to realize the gains unlike its average peer.

What does this mean?

Though Sinopec Oilfield Service’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 forecast what will happen in the future and when. The most valuable step is to examine company-specific issues Sinopec Oilfield Service may be facing and whether management guidance has consistently been met in the past. You should continue to research Sinopec Oilfield Service to get a better picture of the stock by looking at: