For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at AusQuest Limited’s (ASX:AQD) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. Check out our latest analysis for AusQuest
How Did AQD’s Recent Performance Stack Up Against Its Past?
I like to 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 blend enables me to examine many different companies in a uniform manner using the latest information. For AusQuest, the most recent bottom-line -A$7.2M, which compared to the previous year’s level, has become less negative. Since these values are somewhat short-term, I have calculated an annualized five-year figure for AusQuest’s net income, which stands at -A$6.7M. This suggests that, AusQuest has historically performed better than recently, although it seems like earnings are now heading back towards to right direction again.
We can further analyze AusQuest’s loss by researching what’s going on 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 -56.37%. 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 muted single-digit rate of 6.76% over the past year, and a substantial 11.62% over the previous five years. This suggests that, though AusQuest is currently unprofitable, it may have benefited from industry tailwinds, moving earnings towards to 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 hard to forecast what will happen in the future and when. The most valuable step is to assess company-specific issues AusQuest may be facing and whether management guidance has steadily been met in the past. You should continue to research AusQuest to get a better picture of the stock by looking at:
1. Financial Health: Is AQD’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. Valuation: What is AQD worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether AQD is currently mispriced by the market.