Assessing WPG Resources Ltd’s (ASX:WPG) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how WPG Resources 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 WPG Resources

Was WPG weak performance lately part of a long-term decline?

I prefer to use the ‘latest twelve-month’ data, 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 allows me to analyze different stocks on a more comparable basis, using the latest information. For WPG Resources, its latest earnings is -A$9.1M, which, relative to last year’s level, has become more negative. Since these figures may be somewhat nearsighted, I’ve determined an annualized five-year figure for WPG’s earnings, which stands at -A$5.7M. This doesn’t look much better, as earnings seem to have consistently been getting more and more negative over time.

We can further evaluate WPG Resources’s loss by looking at what has been happening in the industry as well as within the company. Firstly, I want to quickly look into the line items. Revenue growth over the last couple of years has increased by 57.91%, implying that WPG Resources is in a high-growth phase with expenses shooting ahead of elevated top-line growth rates, leading to yearly losses. Looking at 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 shows that any uplift the industry is deriving benefit from, WPG Resources has not been able to gain as much as its industry peers.

What does this mean?

Though WPG Resources’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to envisage what will occur going forward, and when. The most valuable step is to examine company-specific issues WPG Resources may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research WPG Resources to get a better picture 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. 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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.