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After looking at Amani Gold Limited’s (ASX:ANL) latest earnings update (31 December 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. See our latest analysis for Amani Gold
Was ANL’s recent earnings decline worse than the long-term trend and the industry?
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 blend allows me to assess various companies on a more comparable basis, using the latest information. For Amani Gold, its latest earnings (trailing twelve month) is -AU$1.42M, which, relative to last year’s figure, has become more negative. Given that these figures are relatively short-term thinking, I’ve created an annualized five-year value for Amani Gold’s net income, which stands at -AU$3.71M. This means that, though net income is negative, it has become less negative over the years.
We can further examine Amani Gold’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Amani Gold has seen an annual decline in revenue of -36.95%, 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 its average earnings by double-digit 15.45% in the past twelve months, and 13.22% over the past five. This suggests that whatever uplift the industry is enjoying, Amani Gold has not been able to reap as much as its industry peers.
What does this mean?
Amani Gold’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 useful step is to examine company-specific issues Amani Gold may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Amani Gold to get a more holistic view of the stock by looking at: