After reading Argonaut Resources NL’s (ASX:ARE) most recent earnings announcement (30 June 2017), I found it useful to look back at how the company has performed in the past 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 a crucial aspect. Below is a brief commentary on my key takeaways. Check out our latest analysis for Argonaut Resources
How ARE fared against its long-term earnings performance and its industry
I 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 technique enables me to analyze various companies on a more comparable basis, using the latest information. For Argonaut Resources, its latest trailing-twelve-month earnings is -A$2.1M, which, against last year’s figure, has become less negative. Since these figures are somewhat myopic, I have created an annualized five-year value for Argonaut Resources’s earnings, which stands at -A$3.9M. This means even though net income is negative, it has become less negative over the years.
We can further analyze Argonaut Resources’s loss by looking at what’s going on 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 -51.93%. The key to profitability here is to make sure the company’s cost growth is well-managed. Eyeballing growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a subdued single-digit rate of 7.36% over the prior year, and a substantial 11.48% over the past five. This suggests that, although Argonaut Resources is presently running a loss, it may have gained from industry tailwinds, moving earnings in the right direction.
What does this mean?
Argonaut Resources’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to forecast what will occur going forward, and when. The most valuable step is to examine company-specific issues Argonaut Resources may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Argonaut Resources to get a better picture of the stock by looking at: