For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Australian Rural Capital Limited (ASX:ARC) useful as an attempt to give more color around how Australian Rural Capital is currently performing. See our latest analysis for ARC
Commentary On ARC’s Past Performance
I 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 Australian Rural Capital, the latest twelve-month earnings -A$0.0M, which compared to last year’s level, has turned from positive to negative. Since these figures are relatively myopic, I have estimated an annualized five-year value for ARC’s earnings, which stands at -A$0.4M. This means although net income is negative, it has become less negative over the years.
Additionally, we can evaluate Australian Rural Capital’s loss by looking at what has been happening in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over last couple of years has been negative at -31.38%. The key to profitability here is to make sure the company’s cost growth is well-managed. Viewing growth from a sector-level, the Australian capital markets industry has been growing, albeit, at a muted single-digit rate of 3.16% in the prior twelve months, and 8.12% over the past five. This means any recent headwind the industry is experiencing, it’s hitting Australian Rural Capital harder than its peers.
What does this mean?
Australian Rural Capital’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 hard to forecast what will occur going forward, and when. The most valuable step is to examine company-specific issues Australian Rural Capital may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Australian Rural Capital to get a more holistic view of the stock by looking at:
1. Financial Health: Is ARC’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.