Exceptional Earnings for Cheniere Energy Partners
Earnings reports can be a bit deceiving for investors and it is important to really break down the numbers and get down to the nitty gritty to truly understand where the company is at. How do you know if a company’s earnings are something to be excited about? According to Seth Jayson, Cheniere Energy Partners is a company that has exciting earnings, and here is how you can tell.
Calling all cash flows
When you are trying to buy the market’s best stocks, it’s worth checking up on your companies’ free cash flow (FCF) once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That’s what we do with this series…
…Over the past 12 months, Cheniere Energy Partners generated $32.2 million cash while it booked a net loss of $20.9 million. That means it turned 11.2% of its revenue into FCF. ..
All cash is not equal
Unfortunately, the cash flow statement isn’t immune from nonsense, either. That’s why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don’t appear on the income statement (such as major capital expenditures).
Keeping up on a company’s cash flows is a great way to know where you stand with your stock holdings. It is also a great way to gauge when to sell or buy more stock. Cheniere’s cash flows puts them in the clear. Use this stock as an example to analyze others in the future.
Quotes taken from report by Seth Jayson, Read the entire article here.
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