After looking at Equatorial Resources Limited’s (ASX:EQX) latest earnings announcement (30 June 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. View our latest analysis for Equatorial Resources
Commentary On EQX’s Past Performance
For the purpose of this commentary, I like to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This blend allows me to examine different stocks on a similar basis, using the most relevant data points. For Equatorial Resources, the most recent twelve-month earnings -A$1.0M, which, relative to last year’s level, has become more negative. Given that these values may be somewhat myopic, I have determined an annualized five-year figure for EQX’s net income, which stands at -A$10.0M. This means that, though net income is negative, it has become less negative over the years.
Additionally, we can assess Equatorial Resources’s loss by looking at what has been happening in the industry on top of within the company. Initially, I want to quickly look into the line items. Revenue growth over the last couple of years has been negative at -12.52%. The key to profitability here is to make sure the company’s cost growth is well-managed. Viewing growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a subdued single-digit rate of 7.36% in the previous twelve months, and 8.50% over the previous few years. This means that whatever tailwind the industry is profiting from, Equatorial Resources has not been able to realize the gains unlike its average peer.
What does this mean?
Equatorial Resources’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to forecast what will occur going forward, and when. The most useful step is to examine company-specific issues Equatorial Resources may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Equatorial Resources to get a more holistic view of the stock by looking at: