For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine WPG Resources Ltd’s (ASX:WPG) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers. See our latest analysis for WPG Resources

Was WPG’s recent earnings decline indicative of a tough track record?

I look at the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This allows me to assess various companies on a more comparable basis, using the most relevant data points. For WPG Resources, its most recent bottom-line (trailing twelve month) is -AU$17.81M, which, against the prior year’s level, has become more negative. Since these figures may be fairly short-term, I’ve created an annualized five-year value for WPG Resources’s earnings, which stands at -AU$6.55M. This doesn’t seem to paint a better picture, since earnings seem to have consistently been getting more and more negative over time.

We can further examine WPG Resources’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years WPG Resources’s top-line has risen by 59.12% on average, implying that the company is in a high-growth phase with expenses shooting ahead of revenues, leading to annual losses. Looking at growth from a sector-level, the Australian metals and mining industry has been growing its average earnings by double-digit 21.03% over the past twelve months, and a less exciting 8.68% over the past half a decade. This suggests that whatever tailwind the industry is profiting from, WPG Resources has not been able to gain 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 difficult to forecast what will happen in the future and when. The most valuable step is to examine company-specific issues WPG Resources may be facing and whether management guidance has consistently been met in the past. You should continue to research WPG Resources to get a more holistic view of the stock by looking at:

1. Financial Health: Is WPG’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. Valuation: What is WPG worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether WPG is currently mispriced by the market.

3. 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.