In this commentary, I will examine Genesis Resources Limited’s (ASX:GES) 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 GES’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 Genesis Resources
Was GES weak performance lately part of a long-term decline?
For the most up-to-date info, 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 enables me to analyze different companies in a uniform manner using the latest information. Genesis Resources’s most recent twelve-month earnings -A$2.4M, which, against the prior year’s level, has become more negative. Since these figures are fairly short-term, I’ve estimated an annualized five-year figure for GES’s earnings, which stands at -A$1.9M. This doesn’t seem to paint a better picture, as earnings seem to have gradually been getting more and more negative over time.
We can further analyze Genesis Resources’s loss by researching what has been happening in the industry on top of within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last couple of years has increased by 82.03%, signalling that Genesis Resources is in a high-growth period with expenses shooting ahead of high top-line growth rates. Scanning 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 year, and 8.50% over the previous five years. This suggests that whatever tailwind the industry is deriving benefit from, Genesis Resources has not been able to reap as much as its industry peers.
What does this mean?
Genesis Resources’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 hard to envisage what will occur going forward, and when. The most insightful step is to examine company-specific issues Genesis Resources may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Genesis Resources to get a better picture of the stock by looking at: