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Additionally, we can assess Buffalo Coal’s loss by looking at what’s going on in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over the past few years has been somewhat soft, remaining flat on average at 1.37%. Given that top-line growth is also pretty flat, the key to profitability in the future would be managing costs. Scanning growth from a sector-level, the Canadian oil and gas industry has been growing its average earnings by double-digit 10.13% over the prior twelve months, and a flatter -0.67% over the previous five years. This shows that, although Buffalo Coal is presently unprofitable, it may have only just benefited from the recent industry expansion, moving earnings into a more favorable position.

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 useful step is to assess company-specific issues Buffalo Coal may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Buffalo Coal to get a more holistic view of the stock by looking at:

1. Financial Health: Is BUF’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

2. Valuation: What is BUF worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether BUF is currently mispriced by the market.

3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.