Measuring Resource Generation Limited’s (ASX:RES) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess RES’s recent performance announced on 30 June 2017 and compare these figures to its historical trend and industry movements. View our latest analysis for Resource Generation
Did RES beat its long-term earnings growth trend and its industry?
I like to use 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 technique enables me to assess various companies in a uniform manner using new information. For Resource Generation, the latest twelve-month earnings -A$2.0M, which, relative to last year’s figure, has become less negative. Since these values may be somewhat nearsighted, I’ve determined an annualized five-year figure for Resource Generation’s earnings, which stands at -A$3.6M. This suggests that, despite the fact that net income is negative, it has become less negative over the years.
Additionally, we can evaluate Resource Generation’s loss by researching what’s going on in the industry along with within the company. Initially, I want to quickly look into the line items. Revenue growth over the past few years has been negative at -20.50%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Scanning growth from a sector-level, the Australian oil and gas industry has been enduring some headwinds in the past twelve months, leading to an average earnings drop of -25.18%. This is a momentous change, given that the industry has constantly been delivering a a solid growth of 28.17% in the previous five years. This means that whatever recent headwind the industry is enduring, the impact on Resource Generation has been softer relative to its peers.
What does this mean?
Though Resource Generation’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to forecast what will occur going forward, and when. The most insightful step is to examine company-specific issues Resource Generation may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Resource Generation to get a better picture of the stock by looking at: