Examining how Hot Chili Limited (ASX:HCH) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how Hot Chili is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its metals and mining industry peers. View our latest analysis for Hot Chili

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

I prefer 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 enables me to examine many different companies in a uniform manner using the most relevant data points. For Hot Chili, its most recent bottom-line (trailing twelve month) is -AU$2.34M, which, in comparison to the prior year’s level, has become less negative. Given that these figures are somewhat short-term thinking, I have calculated an annualized five-year figure for Hot Chili’s net income, which stands at -AU$7.01M. This means although net income is negative, it has become less negative over the years.

We can further analyze Hot Chili’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Hot Chili has seen an annual decline in revenue of -89.56%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting 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 past twelve months, and a substantial 13.69% over the past five years. This means while Hot Chili is presently unprofitable, it may have gained from industry tailwinds, moving earnings into a more favorable position.

What does this mean?

Though Hot Chili’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 predict what will occur going forward, and when. The most valuable step is to examine company-specific issues Hot Chili may be facing and whether management guidance has dependably been met in the past. You should continue to research Hot Chili to get a more holistic view of the stock by looking at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.