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When Emergent Resources Limited (ASX:EMG) announced its most recent earnings (30 June 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Emergent Resources 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 EMG has performed. See our latest analysis for Emergent Resources

How EMG fared against its long-term earnings performance and its industry

I 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 enables me to examine different stocks on a more comparable basis, using new information. For Emergent Resources, its most recent trailing-twelve-month earnings is -AU$554.61K, which, in comparison to the prior year’s level, has become less negative. Given that these figures are somewhat short-term, I have estimated an annualized five-year figure for EMG’s net income, which stands at -AU$2.30M. This means though net income is negative, it has become less negative over the years.

We can further evaluate Emergent Resources’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Emergent Resources has seen an annual decline in revenue of -10.16%, 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 muted single-digit rate of 7.36% over the past twelve months, and a substantial 11.48% over the past five. This suggests that, though Emergent Resources is presently loss-making, it may have been aided by industry tailwinds, moving earnings into a more favorable position.

What does this mean?

Emergent Resources’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will occur going forward, and when. The most insightful step is to examine company-specific issues Emergent Resources may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Emergent Resources to get a more holistic view of the stock by looking at:

• 1. Financial Health: Is EMG’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.