When Cape Lambert Resources Limited (ASX:CFE) 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 Cape Lambert Resources 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 CFE has performed. See our latest analysis for CFE
How CFE fared against its long-term earnings performance and its industry
To account for any quarterly or half-yearly updates, I 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 method enables me to examine various companies in a uniform manner using the most relevant data points. Cape Lambert Resources’s most recent earnings -A$10.8M, which, against the previous year’s figure, has become less negative. Given that these values may be somewhat short-term, I have determined an annualized five-year figure for Cape Lambert Resources’s net income, which stands at -A$50.6M. This suggests that, despite the fact that net income is negative, it has become less negative over the years.
Additionally, we can evaluate Cape Lambert Resources’s loss by looking at what’s going on in the industry on top of within the company. Initially, I want to quickly look into the line items. Revenue growth over last couple of years has been negative at -21.84%. The key to profitability here is to make sure the company’s cost growth is well-managed. Eyeballing 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 prior year, and a substantial 10.06% over the past five. This shows that, though Cape Lambert Resources is currently loss-making, it may have benefited from industry tailwinds, moving earnings into a more favorable position.
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 valuable step is to assess company-specific issues Cape Lambert Resources may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Cape Lambert Resources to get a more holistic view of the stock by looking at: