When Richland Resources Ltd (AIM:RLD) 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 Richland 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 RLD has performed. Check out our latest analysis for Richland Resources
Commentary On RLD’s Past Performance
I prefer to 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 blend allows me to examine many different companies on a similar basis, using the latest information. For Richland Resources, its most recent earnings (trailing twelve month) is -US$2.50M, which compared to the previous year’s figure, has become less negative. Given that these values may be somewhat nearsighted, I have determined an annualized five-year value for Richland Resources’s net income, which stands at -US$3.66M. This means although net income is negative, it has become less negative over the years.
We can further examine Richland Resources’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Richland Resources has seen an annual decline in revenue of -44.73%, 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 UK metals and mining industry has been growing its average earnings by double-digit 40.62% in the prior year, . This is a change from a volatile drop of -7.85% in the previous couple of years. This shows that any uplift the industry is deriving benefit from, Richland Resources has not been able to realize the gains unlike its industry peers.
What does this mean?
Though Richland Resources’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 forecast what will happen in the future and when. The most valuable step is to assess company-specific issues Richland Resources may be facing and whether management guidance has steadily been met in the past. You should continue to research Richland Resources to get a better picture of the stock by looking at:
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1. Financial Health: Is RLD’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.
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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.