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Assessing Strike Resources Limited’s (ASX:SRK) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess SRK’s recent performance announced on 31 December 2017 and evaluate these figures to its longer term trend and industry movements. See our latest analysis for Strike Resources

Did SRK perform worse than its track record and industry?

I prefer to 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 enables me to assess various companies on a more comparable basis, using the most relevant data points. For Strike Resources, its latest trailing-twelve-month earnings is -AU$1.00M, which, against the prior year’s level, has become more negative. Given that these values may be somewhat short-term thinking, I have estimated an annualized five-year figure for SRK’s earnings, which stands at -AU$9.06M. This suggests that, even though net income is negative, it has become less negative over the years.

We can further analyze Strike Resources’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Strike Resources has seen an annual decline in revenue of -29.25%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the Australian metals and mining industry has been growing its average earnings by double-digit 15.45% over the prior year, and 13.22% over the past five years. This means that any uplift the industry is deriving benefit from, Strike Resources has not been able to gain as much as its industry peers.

What does this mean?

Strike Resources’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will occur going forward, and when. The most valuable step is to examine company-specific issues Strike Resources may be facing and whether management guidance has dependably been met in the past. You should continue to research Strike Resources to get a better picture of the stock by looking at:

• 1. Financial Health: Is SRK’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 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.