When Terramin Australia Limited (ASX:TZN) released its most recent earnings update (30 June 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Terramin Australia performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see TZN has performed. Check out our latest analysis for Terramin Australia
Could TZN beat the long-term trend and outperform its industry?
For the purpose of this commentary, I like to use 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 technique enables me to assess many different companies in a uniform manner using new information. For Terramin Australia, the most recent earnings -A$1.8M, which, in comparison to the previous year’s figure, has become less negative. Since these figures are somewhat short-term, I have determined an annualized five-year value for TZN’s net income, which stands at -A$17.4M. This shows that, even though net income is negative, it has become less negative over the years.
We can further examine Terramin Australia’s loss by researching what has been happening in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over the past few years has been negative at -35.26%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Eyeballing growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a unexciting single-digit rate of 7.36% over the previous year, and 8.50% over the past couple of years. This means that, although Terramin Australia is currently loss-making, it may have gained from industry tailwinds, moving earnings towards to right direction.
What does this mean?
Terramin Australia’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to predict what will happen in the future and when. The most insightful step is to assess company-specific issues Terramin Australia may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Terramin Australia to get a better picture of the stock by looking at:
1. Financial Health: Is TZN’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.