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For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Hawkstone Mining Limited (ASX:HWK) useful as an attempt to give more color around how Hawkstone Mining is currently performing. View our latest analysis for Hawkstone Mining

Despite a decline, did HWK underperform the long-term trend and the industry?

I 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 technique allows me to analyze many different companies on a more comparable basis, using new information. For Hawkstone Mining, its most recent bottom-line (trailing twelve month) is -AU$1.04M, which, relative to last year’s level, has become more negative. Since these values may be fairly myopic, I have computed an annualized five-year figure for Hawkstone Mining’s net income, which stands at -AU$6.70M. This means that, although net income is negative, it has become less negative over the years.

We can further assess Hawkstone Mining’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Hawkstone Mining has seen an annual decline in revenue of -53.53%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Looking at growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a muted single-digit rate of 8.07% over the prior twelve months, and a substantial 14.63% over the past five years. This means whatever uplift the industry is profiting from, Hawkstone Mining has not been able to reap as much as its industry peers.

What does this mean?

Though Hawkstone Mining’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to forecast what will occur going forward, and when. The most valuable step is to examine company-specific issues Hawkstone Mining may be facing and whether management guidance has consistently been met in the past. You should continue to research Hawkstone Mining to get a better picture of the stock by looking at:

• 1. Financial Health: Is HWK’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 trailing twelve months from 30 June 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.