When Pacifico Minerals Limited (ASX:PMY) released its most recent earnings update (31 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Pacifico Minerals 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 PMY has performed. View our latest analysis for Pacifico Minerals

Were PMY’s earnings stronger than its past performances and the industry?

For the most up-to-date info, 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 allows me to examine different companies on a similar basis, using the latest information. For Pacifico Minerals, its most recent trailing-twelve-month earnings is -AU$1.37M, which, relative to the previous year’s level, has become less negative. Given that these figures may be fairly short-term, I’ve estimated an annualized five-year value for PMY’s earnings, which stands at -AU$1.51M. This means that, while net income is negative, it has become less negative over the years.

We can further analyze Pacifico Minerals’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Pacifico Minerals has seen an annual decline in revenue of -19.40%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Looking at growth from a sector-level, the Australian metals and mining industry has been growing its average earnings by double-digit 15.31% over the past twelve months, and 13.13% over the last five years. This means while Pacifico Minerals is currently unprofitable, it may have gained from industry tailwinds, moving earnings towards to right direction.

What does this mean?

Pacifico Minerals’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 happen in the future and when. The most insightful step is to examine company-specific issues Pacifico Minerals may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Pacifico Minerals to get a better picture of the stock by looking at:

• 1. Financial Health: Is PMY’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 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.