Understanding Kogi Iron Limited’s (ASX:KFE) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Kogi Iron is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. View our latest analysis for Kogi Iron
Was KFE weak performance lately part of a long-term decline?
For the purpose of this commentary, 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 allows me to analyze various companies on a more comparable basis, using new information. For Kogi Iron, the most recent twelve-month earnings -A$2.0M, which compared to the previous year’s figure, has become more negative. Given that these figures are relatively short-term thinking, I’ve estimated an annualized five-year value for KFE’s earnings, which stands at -A$2.9M. This suggests that, although net income is negative, it has become less negative over the years.
We can further evaluate Kogi Iron’s loss by researching what’s going on in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over last few years has grown by a mere 7.21%. Since top-line growth is also pretty flat, the key to profitability moving forward would be managing cost growth rates. 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% in the past twelve months, and a substantial 10.06% over the previous few years. This means that any uplift the industry is enjoying, Kogi Iron has not been able to leverage it as much as its average peer.
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 examine company-specific issues Kogi Iron may be facing and whether management guidance has regularly been met in the past. You should continue to research Kogi Iron to get a better picture of the stock by looking at:
1. Financial Health: Is KFE’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. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.