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 Astro Resources NL (ASX:ARO) useful as an attempt to give more color around how Astro Resources is currently performing. See our latest analysis for Astro Resources
How Well Did ARO Perform?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, 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 technique enables me to assess various companies in a uniform manner using the latest information. Astro Resources’s most recent earnings -A$0.6M, which, relative to the previous year’s level, has become less negative. Since these figures are relatively short-term thinking, I’ve estimated an annualized five-year figure for ARO’s net income, which stands at -A$1.4M. This means that, although net income is negative, it has become less negative over the years.
Additionally, we can examine Astro Resources’s loss by researching what’s going on in the industry along with within the company. Firstly, I want to briefly look into the line items. Revenue growth over the past couple of years has been negative at -33.09%. 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 metals and mining industry has been growing, albeit, at a unexciting single-digit rate of 6.76% in the prior twelve months, and a substantial 10.06% over the previous few years. This shows that, even though Astro Resources is presently unprofitable, it may have gained from industry tailwinds, moving earnings in the right direction.
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 envisage what will occur going forward, and when. The most insightful step is to examine company-specific issues Astro Resources may be facing and whether management guidance has steadily been met in the past. You should continue to research Astro Resources to get a more holistic view of the stock by looking at:
1. Financial Health: Is ARO’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.