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After reading Kalamazoo Resources Limited’s (ASX:KZR) 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 Kalamazoo Resources’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for Kalamazoo Resources
Did KZR’s recent earnings growth beat the long-term trend and the industry?
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 blend allows me to assess different stocks in a uniform manner using new information. For Kalamazoo Resources, its latest earnings (trailing twelve month) is -AU$252.21K, which compared to last year’s figure, has become less negative. Given that these values may be somewhat short-term thinking, I have estimated an annualized five-year figure for Kalamazoo Resources’s earnings, which stands at -AU$1.42M. This means even though net income is negative, it has become less negative over the years.
We can further evaluate Kalamazoo Resources’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Kalamazoo Resources has seen an annual decline in revenue of -7.83%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the Australian metals and mining industry has been growing its average earnings by double-digit 18.18% over the past twelve months, and a more subdued 8.68% over the past five years. This suggests that, though Kalamazoo Resources is presently loss-making, it may have been aided by industry tailwinds, moving earnings towards to right direction.
What does this mean?
Though Kalamazoo Resources’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to envisage what will happen in the future and when. The most insightful step is to assess company-specific issues Kalamazoo Resources may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Kalamazoo Resources to get a better picture of the stock by looking at: