When AJ Lucas Group Limited (ASX:AJL) 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 AJ Lucas Group 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 AJL has performed. See our latest analysis for AJ Lucas Group
Despite a decline, did AJL underperform the long-term trend and the industry?
I 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 allows me to assess different stocks in a uniform manner using the most relevant data points. For AJ Lucas Group, its most recent bottom-line is -A$39.0M, which, against the previous year’s figure, has become more negative. Given that these values may be somewhat nearsighted, I have determined an annualized five-year value for AJ Lucas Group’s earnings, which stands at -A$64.4M. This suggests that, although net income is negative, it has become less negative over the years.
Additionally, we can analyze AJ Lucas Group’s loss by looking at 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 last few years has been negative at -24.55%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Viewing growth from a sector-level, the Australian construction and engineering industry has been enduring some headwinds over the previous couple of years, leading to an average earnings drop of -10.60% in the most recent year. This means that any recent the industry is facing, it’s hitting AJ Lucas Group harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most useful step is to examine company-specific issues AJ Lucas Group may be facing and whether management guidance has dependably been met in the past. You should continue to research AJ Lucas Group to get a better picture of the stock by looking at:
1. Financial Health: Is AJL’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.