Spark Energy, Inc. :SPKE-US: Earnings Analysis: 2016 By the Numbers : March 10, 2017

Spark Energy, Inc. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Spark Energy, Inc. – Duke Energy Corporation, DTE Energy Company, Southern Company and SCANA Corporation (DUK-US, DTE-US, SO-US and SCG-US) that have also reported for this period.

Highlights

  • Gross margins widened from 25.01% to 27.21% compared to the same period last year, operating (EBITDA) margins now 17.67% from 14.90%.
  • Year-on-year change in operating cash flow of 49.90% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 546.41 357.96 325.89 311.57 381.22
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 14.44 3.87 -0.05 31.41 26.09
Earnings Growth (YOY) 273.71 7257.41 -100.17 20.38 N/A
Net Margin 2.64 1.08 -0.02 10.08 6.84
EPS 2.23 1.06 -0.02 N/A N/A
Return on Equity 18.39 13.46 -0.18 64.62 42.56
Return on Assets 5.37 2.57 -0.04 26.36 20.18

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Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 25.01% to 27.21% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 14.90% to 17.67% compared to the same period last year. For comparison, gross margins were 25.01% and EBITDA margins were 14.90% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

SPKE-US‘s change in operating cash flow of 49.90% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 7.81% to 11.67% and (2) one-time items. The company’s pretax margins are now 13.93% compared to 7.81% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Spark Energy, Inc. operates as a retail energy services company, which supplies electricity and natural gas. It operates through the Retail Natural Gas and Retail Electricity segments. The Retail Natural Gas segment purchases natural gas supply through physical and financial transactions with market counterparts and supply natural gas to residential and commercial consumers pursuant to fixed-price, variable-price and flat rate contracts. The Retail Electricity segment supplies through physical and financial transactions with market counterparts and independent system operators and supply electricity to residential and commercial consumers pursuant to fixed-price and variable-price contracts. The firm also provides green energy solutions and offers renewable electricity and carbon neutral natural gas products. The company was founded in 1999 and is headquartered in Houston, TX.

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