In this commentary, I will examine Champion Iron Limited’s (ASX:CIA) latest earnings update (30 September 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the metals and mining industry performed. As an investor, I find it beneficial to assess CIA’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for CIA
How Well Did CIA Perform?
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 blend allows me to examine different stocks on a similar basis, using the most relevant data points. For Champion Iron, the most recent earnings -CA$30.6M, which, against the previous year’s level, has become more negative. Since these values are somewhat short-term, I have calculated an annualized five-year figure for CIA’s earnings, which stands at -CA$17.2M. This doesn’t look much better, as earnings seem to have steadily been getting more and more negative over time.
Additionally, we can analyze Champion Iron’s loss by looking at what’s going on in the industry along with within the company. Firstly, I want to briefly look into the line items. Revenue growth over last few years has increased by 37.10%, signalling that Champion Iron is in a high-growth period with expenses racing ahead high top-line growth rates. Scanning growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a subdued single-digit rate of 6.76% over the past year, and a substantial 11.62% over the past five. This suggests that any uplift the industry is deriving benefit from, Champion Iron has not been able to gain as much as its industry peers.
What does this mean?
Though Champion Iron’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to predict what will occur going forward, and when. The most useful step is to examine company-specific issues Champion Iron may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Champion Iron to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for CIA’s future growth? Take a look at our free research report of analyst consensus for CIA’s outlook.