For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at Newfield Resources Limited’s (ASX:NWF) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. See our latest analysis for Newfield Resources

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

To account for any quarterly or half-yearly updates, I 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 method allows me to assess many different companies on a more comparable basis, using the most relevant data points. For Newfield Resources, its latest trailing-twelve-month earnings is -AU$1.40M, which, relative to the previous year’s figure, has become less negative. Since these values are somewhat short-term, I have created an annualized five-year value for Newfield Resources’s earnings, which stands at -AU$1.78M. This means while net income is negative, it has become less negative over the years.

We can further evaluate Newfield Resources’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Newfield Resources’s top-line has increased by 57.13% on average, indicating that the company is in a high-growth phase with expenses racing ahead revenues, leading to annual losses. 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 last five years. This suggests that, while Newfield Resources is presently loss-making, it may have benefited from industry tailwinds, moving earnings into a more favorable position.

What does this mean?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to predict what will occur going forward, and when. The most useful step is to examine company-specific issues Newfield Resources may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Newfield Resources 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.