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For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Consolidated Zinc Limited (ASX:CZL) useful as an attempt to give more color around how Consolidated Zinc is currently performing. See our latest analysis for Consolidated Zinc
Was CZL’s recent earnings decline worse than 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 blend enables me to analyze various companies on a similar basis, using the most relevant data points. For Consolidated Zinc, its most recent earnings (trailing twelve month) is -AU$1.34M, which compared to the prior year’s figure, has become more negative. Given that these values may be relatively nearsighted, I have estimated an annualized five-year value for CZL’s earnings, which stands at -AU$1.54M. This suggests that, although net income is negative, it has become less negative over the years.
We can further evaluate Consolidated Zinc’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Consolidated Zinc’s revenue growth has been fairly soft, with an annual growth rate of 0.44%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Scanning 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 more muted 8.68% over the past five. This suggests that any tailwind the industry is benefiting from, Consolidated Zinc has not been able to realize the gains unlike its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to predict what will occur going forward, and when. The most valuable step is to assess company-specific issues Consolidated Zinc may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Consolidated Zinc to get a better picture of the stock by looking at:
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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.
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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 31 December 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.