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After looking at Tanami Gold NL’s (ASX:TAM) latest earnings announcement (31 December 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. 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 a crucial aspect. Below is a brief commentary on my key takeaways. See our latest analysis for Tanami Gold
Was TAM’s recent earnings decline worse than the long-term trend and the industry?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This allows me to assess various companies on a similar basis, using the latest information. For Tanami Gold, its latest earnings (trailing twelve month) is -AU$4.66M, which compared to the previous year’s figure, has become more negative. Since these values may be relatively myopic, I have computed an annualized five-year value for Tanami Gold’s net income, which stands at -AU$13.21M. This means although net income is negative, it has become less negative over the years.
We can further evaluate Tanami Gold’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Tanami Gold has seen an annual decline in revenue of -55.13%, 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 its average earnings by double-digit 20.13% in the previous year, and 13.22% over the past five. This means that whatever uplift the industry is deriving benefit from, Tanami Gold has not been able to gain as much as its industry peers.
What does this mean?
Though Tanami Gold’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 envisage what will happen in the future and when. The most insightful step is to examine company-specific issues Tanami Gold may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Tanami Gold to get a more holistic view of the stock by looking at: