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Examining Crater Gold Mining Limited’s (ASX:CGN) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess CGN’s latest performance announced on 31 December 2017 and weight these figures against its longer term trend and industry movements. Check out our latest analysis for Crater Gold Mining
Was CGN’s recent earnings decline worse than the long-term trend and the industry?
I prefer to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This enables me to analyze many different companies in a uniform manner using the most relevant data points. For Crater Gold Mining, its latest trailing-twelve-month earnings is -AU$19.18M, which compared to the previous year’s figure, has become more negative. Since these values are fairly short-term thinking, I’ve created an annualized five-year value for CGN’s net income, which stands at -AU$7.37M. This doesn’t seem to paint a better picture, as earnings seem to have consistently been getting more and more negative over time.
We can further evaluate Crater Gold Mining’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Crater Gold Mining’s top-line has increased by 21.04% on average, indicating that the company is in a high-growth period with expenses shooting ahead of revenues, leading to annual losses. Looking at 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 13.26% over the last five years. This shows that whatever uplift the industry is profiting from, Crater Gold Mining has not been able to realize the gains unlike its average peer.
What does this mean?
Though Crater Gold Mining’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to forecast what will happen in the future and when. The most useful step is to examine company-specific issues Crater Gold Mining may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Crater Gold Mining to get a more holistic view of the stock by looking at:
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Financial Health: Is CGN’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.
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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.