Today I will take a look at Kazakhstan Potash Corporation Limited’s (ASX:KPC) most recent earnings update (30 June 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the metals and mining industry performed. As an investor, I find it beneficial to assess KPC’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for Kazakhstan Potash
Could KPC beat the long-term trend and outperform its industry?
To account for any quarterly or half-yearly updates, I 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 method enables me to examine various companies in a uniform manner using the most relevant data points. For Kazakhstan Potash, the latest twelve-month earnings -A$10.6M, which, in comparison to the prior year’s figure, has become less negative. Given that these values are fairly nearsighted, I’ve estimated an annualized five-year figure for Kazakhstan Potash’s earnings, which stands at -A$23.5M. This suggests that, although net income is negative, it has become less negative over the years.
Additionally, we can analyze Kazakhstan Potash’s loss by looking at what’s going on in the industry along with within the company. First, I want to briefly look into the line items. Revenue growth over the last few years has risen by 56.99%, indicating that Kazakhstan Potash is in a high-growth period with expenses racing ahead high top-line growth rates. Eyeballing growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a muted single-digit rate of 7.36% over the past year, and 8.50% over the previous few years. This suggests that, while Kazakhstan Potash is presently running a loss, it may have benefited from industry tailwinds, moving earnings towards to right direction.
What does this mean?
Kazakhstan Potash’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 useful step is to examine company-specific issues Kazakhstan Potash may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Kazakhstan Potash to get a better picture of the stock by looking at: