When Rex Minerals Limited (ASX:RXM) announced its most recent earnings (30 June 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Rex Minerals has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see RXM has performed. Check out our latest analysis for Rex Minerals
How Well Did RXM Perform?
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 allows me to analyze various companies on a similar basis, using new information. For Rex Minerals, the most recent earnings -A$0.8M, which, in comparison to last year’s figure, has become less negative. Given that these figures are somewhat myopic, I’ve created an annualized five-year value for Rex Minerals’s net income, which stands at -A$4.2M. This means despite the fact that net income is negative, it has become less negative over the years.
Additionally, we can evaluate Rex Minerals’s loss by researching what’s going on in the industry on top of within the company. Initially, I want to quickly look into the line items. Revenue growth over last couple of years has grew by 44.37%, signalling that Rex Minerals is in a high-growth phase with expenses racing ahead elevated top-line growth rates. 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% in the prior twelve months, and a substantial 11.62% over the past couple of years. This means that, while Rex Minerals is presently running a loss, it may have gained from industry tailwinds, moving earnings in the right direction.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to predict what will happen in the future and when. The most insightful step is to assess company-specific issues Rex Minerals may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Rex Minerals to get a better picture of the stock by looking at:
1. Financial Health: Is RXM’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.