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When Carbonxt Group Limited (ASX:CG1) announced its most recent earnings (31 December 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Carbonxt Group performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see CG1 has performed. See our latest analysis for Carbonxt Group
Was CG1 weak performance lately part of a long-term decline?
I prefer to use the ‘latest twelve-month’ data, 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 allows me to assess different stocks in a uniform manner using the latest information. For Carbonxt Group, its latest earnings (trailing twelve month) is -AU$5.52M, which, against last year’s figure, has become more negative. Given that these figures may be relatively myopic, I’ve calculated an annualized five-year figure for CG1’s earnings, which stands at -AU$4.76M. This doesn’t seem to paint a better picture, as earnings seem to have steadily been getting more and more negative over time.
We can further examine Carbonxt Group’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Carbonxt Group’s top-line has grown by 75.44% on average, implying that the company is in a high-growth phase with expenses shooting ahead of revenues, leading to annual losses. Scanning growth from a sector-level, the Australian chemicals industry has been growing its average earnings by double-digit 11.13% in the prior year, and a more muted 9.30% over the previous five years. This shows that whatever uplift the industry is deriving benefit from, Carbonxt Group has not been able to gain as much as its industry peers.
What does this mean?
Though Carbonxt Group’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 envisage what will occur going forward, and when. The most insightful step is to assess company-specific issues Carbonxt Group may be facing and whether management guidance has dependably been met in the past. You should continue to research Carbonxt Group to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for CG1’s future growth? Take a look at our free research report of analyst consensus for CG1’s outlook.
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Financial Health: Is CG1’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.
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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 31 December 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.