For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Fonterra Co-operative Group Limited (NZSE:FCG) useful as an attempt to give more color around how Fonterra Co-operative Group is currently performing. See our latest analysis for Fonterra Co-operative Group

How Well Did FCG Perform?

For the most up-to-date info, I use the ‘latest twelve-month’ data, 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 technique enables me to examine different stocks in a uniform manner using new information. For Fonterra Co-operative Group, its most recent trailing-twelve-month earnings is -NZ$33.00M, which compared to the previous year’s figure, has turned from positive to negative. Since these figures may be fairly short-term, I have calculated an annualized five-year figure for FCG’s net income, which stands at NZ$568.57M.

We can further examine Fonterra Co-operative Group’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Fonterra Co-operative Group’s revenue growth has been relatively subdued, with an annual growth rate of -1.45%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Inspecting growth from a sector-level, the NZ food industry has been growing its average earnings by double-digit 34.46% in the past year, and 35.74% over the past five. This shows that any tailwind the industry is profiting from, Fonterra Co-operative Group has not been able to reap as much as its average peer.

What does this mean?

Though Fonterra Co-operative Group’s past data is helpful, it is only one aspect of my investment thesis. 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 Fonterra Co-operative Group may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Fonterra Co-operative Group to get a better picture of the stock by looking at:

1. Financial Health: Is FCG’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 January 2018. 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.