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After reading Dragon Mountain Gold Limited’s (ASX:DMG) most recent earnings announcement (31 December 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Dragon Mountain Gold’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for Dragon Mountain Gold
Were DMG’s earnings stronger than its past performances and the industry?
I use data from the most recent 12 months, 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 analyze various companies on a similar basis, using the most relevant data points. For Dragon Mountain Gold, its most recent trailing-twelve-month earnings is -AU$550.99K, which, against the previous year’s level, has become less negative. Given that these values may be relatively short-term, I have determined an annualized five-year figure for DMG’s net income, which stands at -AU$2.54M. This means that, despite the fact that net income is negative, it has become less negative over the years.
We can further evaluate Dragon Mountain Gold’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Dragon Mountain Gold has seen an annual decline in revenue of -40.59%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Eyeballing 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 means even though Dragon Mountain Gold is presently loss-making, it may have benefited from industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Dragon Mountain Gold’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 hard to predict what will happen in the future and when. The most useful step is to examine company-specific issues Dragon Mountain Gold may be facing and whether management guidance has regularly been met in the past. You should continue to research Dragon Mountain Gold to get a more holistic view of the stock by looking at: