In this commentary, I will examine Niuminco Group Limited’s (ASX:NIU) latest earnings update (30 June 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the metals and mining industry performed. As an investor, I find it beneficial to assess NIU’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. Check out our latest analysis for Niuminco Group
Was NIU’s recent earnings decline worse than the long-term trend and the industry?
For the most up-to-date info, I 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 blend enables me to analyze different companies in a uniform manner using new information. For Niuminco Group, the latest earnings -A$3.4M, which, relative to the previous year’s level, has become more negative. Since these values are fairly short-term, I’ve computed an annualized five-year figure for NIU’s earnings, which stands at -A$4.8M. This suggests that, even though net income is negative, it has become less negative over the years.
Additionally, we can analyze Niuminco Group’s loss by looking at what has been happening in the industry on top of within the company. Firstly, I want to quickly look into the line items. Revenue growth over past couple of years has been negative at -6.31%. 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 metals and mining industry has been growing, albeit, at a muted single-digit rate of 6.76% in the previous twelve months, and a substantial 10.06% over the past couple of years. This means that whatever uplift the industry is deriving benefit from, Niuminco Group has not been able to realize the gains unlike its industry peers.
What does this mean?
Though Niuminco Group’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most useful step is to assess company-specific issues Niuminco Group may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Niuminco Group to get a more holistic view of the stock by looking at:
1. Financial Health: Is NIU’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.