Understanding Target Energy Limited’s (ASX:TEX) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Target Energy is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. Check out our latest analysis for Target Energy

Were TEX’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 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 allows me to assess various companies on a similar basis, using the most relevant data points. For Target Energy, its most recent bottom-line (trailing twelve month) is -AU$2.25M, which, against the previous year’s figure, has become less negative. Since these figures may be somewhat short-term, I’ve calculated an annualized five-year figure for Target Energy’s net income, which stands at -AU$7.31M. This shows that, though net income is negative, it has become less negative over the years.

We can further examine Target Energy’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Target Energy has seen an annual decline in revenue of -3.72%, 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 ramping up growth, more than doubling average earnings in the past twelve months, and a more muted 7.32% over the past five years. This suggests that any uplift the industry is enjoying, Target Energy 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. With companies that are currently loss-making, it is always hard to envisage what will happen in the future and when. The most valuable step is to assess company-specific issues Target Energy may be facing and whether management guidance has dependably been met in the past. You should continue to research Target Energy to get a better picture of the stock by looking at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.