After reading Strategic Minerals Corporation NL’s (ASX:SMC) most recent earnings announcement (31 December 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 Strategic Minerals
Despite a decline, did SMC underperform the long-term trend and the industry?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, 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 analyze many different companies in a uniform manner using the latest information. For Strategic Minerals, its most recent earnings (trailing twelve month) is -AU$620.95K, which compared to the prior year’s level, has become more negative. Since these values may be fairly short-term, I’ve computed an annualized five-year figure for Strategic Minerals’s earnings, which stands at -AU$940.87K. This means that, despite the fact that net income is negative, it has become less negative over the years.
We can further evaluate Strategic Minerals’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Strategic Minerals has seen an annual decline in revenue of -31.01%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the Australian metals and mining industry has been growing its average earnings by double-digit 18.18% in the past year, and a less exciting 8.68% over the past half a decade. This means any uplift the industry is deriving benefit from, Strategic Minerals has not been able to gain as much as its industry peers.
What does this mean?
Strategic Minerals’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 predict what will happen in the future and when. The most valuable step is to assess company-specific issues Strategic Minerals may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Strategic Minerals to get a more holistic view of the stock by looking at: