Understanding Terrain Minerals Limited’s (ASX:TMX) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Terrain Minerals is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. See our latest analysis for Terrain Minerals
Despite a decline, did TMX underperform the long-term trend and the industry?
I like to use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This allows me to examine many different companies in a uniform manner using new information. For Terrain Minerals, its most recent earnings (trailing twelve month) is -A$0.7M, which compared to the previous year’s figure, has become more negative. Given that these figures may be fairly short-term, I’ve computed an annualized five-year value for TMX’s earnings, which stands at -A$2.1M. This means that, although net income is negative, it has become less negative over the years.
We can further evaluate Terrain Minerals’s loss by researching what has been happening in the industry as well as within the company. Initially, I want to briefly look into the line items. Revenue growth over the last few years has been negative at -39.94%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Eyeballing growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a unexciting single-digit rate of 7.36% over the prior twelve months, and a substantial 11.48% over the previous few years. This means that any uplift the industry is profiting from, Terrain Minerals has not been able to reap as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always hard to envisage what will occur going forward, and when. The most useful step is to assess company-specific issues Terrain Minerals may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Terrain Minerals to get a more holistic view of the stock by looking at:
1. Financial Health: Is TMX’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 30 June 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.