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Investors with a long-term horizong may find it valuable to assess MEC Resources Limited’s (ASX:MMR) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how MEC Resources is currently performing. View our latest analysis for MEC Resources

How Did MMR’s Recent Performance Stack Up Against Its Past?

For the most up-to-date info, I use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This allows me to assess different companies on a similar basis, using the latest information. For MEC Resources, its most recent trailing-twelve-month earnings is -AU$829.16K, which, against last year’s figure, has become less negative. Since these figures may be relatively myopic, I have created an annualized five-year value for MMR’s earnings, which stands at -AU$2.80M. This means that, while net income is negative, it has become less negative over the years.

We can further evaluate MEC Resources’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years MEC Resources has seen an annual decline in revenue of -47.83%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Viewing growth from a sector-level, the Australian oil and gas industry has been multiplying growth, more than doubling average earnings over the prior twelve months, and a notable 13.22% over the past five. This shows that any tailwind the industry is profiting from, MEC Resources has not been able to gain as much as its average peer.

What does this mean?

Though MEC Resources’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to forecast what will happen in the future and when. The most useful step is to assess company-specific issues MEC Resources may be facing and whether management guidance has dependably been met in the past. You should continue to research MEC Resources to get a more holistic view of the stock by looking at:

• 1. Financial Health: Is MMR’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.