Examining RMG Limited’s (ASX:RMG) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess RMG’s latest performance announced on 31 December 2017 and weigh these figures against its longer term trend and industry movements. Check out our latest analysis for RMG
How Did RMG’s Recent Performance Stack Up Against Its Past?
To account for any quarterly or half-yearly updates, 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 blend allows me to examine different stocks on a more comparable basis, using new information. For RMG, its most recent earnings (trailing twelve month) is -AU$1.06M, which, against the prior year’s level, has become less negative. Given that these values may be relatively short-term thinking, I have calculated an annualized five-year value for RMG’s earnings, which stands at -AU$2.93M. This shows that, while net income is negative, it has become less negative over the years.
We can further evaluate RMG’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years RMG has seen an annual decline in revenue of -38.97%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Looking at growth from a sector-level, the Australian metals and mining industry has been growing its average earnings by double-digit 17.02% in the prior twelve months, and 13.22% over the last five years. This suggests that, though RMG is currently running a loss, it may have gained from industry tailwinds, moving earnings into a more favorable position.
What does this mean?
RMG’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 examine company-specific issues RMG may be facing and whether management guidance has consistently been met in the past. You should continue to research RMG to get a more holistic view of the stock by looking at:
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Financial Health: Is RMG’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.
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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.