For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Alta Zinc Limited’s (ASX:AZI) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers. See our latest analysis for Alta Zinc

Despite a decline, did AZI underperform the long-term trend and the industry?

For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This allows me to analyze many different companies on a more comparable basis, using new information. For Alta Zinc, its latest earnings (trailing twelve month) is -AU$10.72M, which, against last year’s level, has become more negative. Since these figures may be fairly short-term thinking, I have determined an annualized five-year figure for AZI’s net income, which stands at -AU$5.12M. This doesn’t look much better, since earnings seem to have gradually been getting more and more negative over time.

We can further assess Alta Zinc’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Alta Zinc has seen an annual decline in revenue of -25.46%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Scanning growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a unexciting single-digit rate of 8.07% in the prior twelve months, and a substantial 13.69% over the last five years. This suggests that whatever tailwind the industry is benefiting from, Alta Zinc has not been able to gain as much as its average peer.

What does this mean?

Alta Zinc’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to predict what will occur going forward, and when. The most insightful step is to examine company-specific issues Alta Zinc may be facing and whether management guidance has consistently been met in the past. You should continue to research Alta Zinc to get a better picture of the stock by looking at:

• 1. Financial Health: Is AZI’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. 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 June 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.