After looking at Silver Mines Limited’s (ASX:SVL) latest earnings update (30 June 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. View our latest analysis for Silver Mines

Did SVL’s recent earnings growth beat the long-term trend and the industry?

For the purpose of this commentary, I like to 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 method enables me to examine different stocks on a similar basis, using the latest information. For Silver Mines, its latest earnings (trailing twelve month) is -AU$2.28M, which, in comparison to the previous year’s level, has become less negative. Since these values may be fairly nearsighted, I’ve determined an annualized five-year figure for SVL’s earnings, which stands at -AU$3.07M. This shows that, even though net income is negative, it has become less negative over the years.

We can further examine Silver Mines’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Silver Mines has seen an annual decline in revenue of -3.26%, 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, albeit, at a unexciting single-digit rate of 8.07% over the previous year, and a substantial 13.69% over the past five. This means while Silver Mines is presently unprofitable, it may have been aided by industry tailwinds, moving earnings towards to right direction.

What does this mean?

Silver Mines’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. 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 Silver Mines may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Silver Mines to get a more holistic view of the stock by looking at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.