Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Minotaur Exploration Limited’s (ASX:MEP) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. Check out our latest analysis for Minotaur Exploration

Was MEP weak performance lately part of a long-term decline?

I prefer to 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 method enables me to assess many different companies on a more comparable basis, using new information. For Minotaur Exploration, its most recent earnings (trailing twelve month) is -AU$4.53M, which, against the previous year’s figure, has become more negative. Given that these figures are somewhat short-term thinking, I’ve estimated an annualized five-year value for Minotaur Exploration’s net income, which stands at -AU$3.95M. This doesn’t look much better, since earnings seem to have gradually been getting more and more negative over time.

We can further evaluate Minotaur Exploration’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Minotaur Exploration has seen an annual decline in revenue of -45.30%, 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 metals and mining industry has been growing, albeit, at a subdued single-digit rate of 8.07% in the previous twelve months, and a substantial 13.69% over the past five years. This means that any uplift the industry is deriving benefit from, Minotaur Exploration has not been able to leverage it as much as its industry peers.

What does this mean?

Though Minotaur Exploration’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to predict what will happen in the future and when. The most insightful step is to examine company-specific issues Minotaur Exploration may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Minotaur Exploration to get a better picture of the stock by looking at:

• 1. Financial Health: Is MEP’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.