Examining how Fe Limited (ASX:FEL) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how Fe is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its metals and mining industry peers. Check out our latest analysis for Fe
How Did FEL’s Recent Performance Stack Up Against Its Past?
I look at the ‘latest twelve-month’ data, 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 method enables me to assess different companies in a uniform manner using the most relevant data points. Fe’s most recent twelve-month earnings -A$0.3M, which, relative to the prior year’s figure, has become less negative. Since these values are relatively short-term, I’ve estimated an annualized five-year value for Fe’s net income, which stands at -A$1.4M. This suggests that, although net income is negative, it has become less negative over the years.
Additionally, we can analyze Fe’s loss by looking at what has been happening in the industry along with within the company. Firstly, I want to briefly look into the line items. Revenue growth over last few years has been negative, with the actual revenue level deteriorating by more than half! The key to profitability here is to make sure the company’s cost growth is well-controlled. Eyeballing growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a unexciting single-digit rate of 6.76% over the previous year, and a substantial 11.62% over the previous five years. This means though Fe is currently unprofitable, it may have been aided by industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Fe’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will happen in the future and when. The most valuable step is to examine company-specific issues Fe may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Fe to get a more holistic view of the stock by looking at:
1. Financial Health: Is FEL’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.