When Red Emperor Resources NL (ASX:RMP) announced its most recent earnings (30 June 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Red Emperor Resources NL has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see RMP has performed. View our latest analysis for Red Emperor Resources NL
Did RMP beat its long-term earnings growth trend and its industry?
To account for any quarterly or half-yearly updates, I 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 enables me to assess different companies on a more comparable basis, using the most relevant data points. Red Emperor Resources NL’s latest twelve-month earnings -A$0.8M, which, relative to the previous year’s figure, has become less negative. Since these values may be somewhat short-term, I have calculated an annualized five-year value for RMP’s net income, which stands at -A$6.9M. This means that, while net income is negative, it has become less negative over the years.
Additionally, we can analyze Red Emperor Resources NL’s loss by researching what has been happening in the industry on top of within the company. Initially, I want to briefly look into the line items. Revenue growth over last few years has grown by a mere 2.33%. Since top-line growth is also pretty flat, the key to profitability moving forward would be managing costs. Inspecting growth from a sector-level, the Australian oil, gas and consumable fuels industry has been growing average earnings growth of 57.50% in the previous twelve months, and a more subdued 5.14% over the previous few years. This suggests that, despite the fact that Red Emperor Resources NL is currently loss-making, it may have gained from industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Red Emperor Resources NL’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 forecast what will happen in the future and when. The most useful step is to assess company-specific issues Red Emperor Resources NL may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Red Emperor Resources NL to get a more holistic view of the stock by looking at: