Examining how Consolidated Zinc Limited (ASX:CZL) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how Consolidated Zinc is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its metals and mining industry peers. See our latest analysis for Consolidated Zinc

Did CZL’s recent earnings growth beat the long-term trend and the industry?

I look at data from the most recent 12 months, 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 allows me to analyze different stocks on a similar basis, using new information. For Consolidated Zinc, its latest earnings is -A$1.4M, which, in comparison to last year’s figure, has become less negative. Since these figures may be relatively short-term thinking, I’ve computed an annualized five-year figure for Consolidated Zinc’s earnings, which stands at -A$1.5M. This shows that, while net income is negative, it has become less negative over the years.

We can further assess Consolidated Zinc’s loss by researching what’s going on in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last couple of years has been negative at -7.71%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Inspecting growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a subdued single-digit rate of 7.36% in the previous year, and a substantial 11.48% over the previous few years. This suggests that, despite the fact that Consolidated Zinc is currently unprofitable, it may have been aided by industry tailwinds, moving earnings towards to right direction.

What does this mean?

Consolidated Zinc’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 difficult to forecast what will happen in the future and when. The most useful step is to examine company-specific issues Consolidated Zinc may be facing and whether management guidance has consistently been met in the past. You should continue to research Consolidated Zinc to get a more holistic view of the stock by looking at:

1. Financial Health: Is CZL’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.