When Kasbah Resources Limited (ASX:KAS) released its most recent earnings update (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 Kasbah Resources 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 KAS has performed. Check out our latest analysis for Kasbah Resources
Was KAS weak performance lately part of a long-term decline?
I look at 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 technique allows me to examine many different companies in a uniform manner using new information. Kasbah Resources’s latest earnings -A$4.9M, which compared to last year’s figure, has become more negative. Since these figures are relatively short-term thinking, I’ve estimated an annualized five-year value for KAS’s net income, which stands at -A$10.6M. This means although net income is negative, it has become less negative over the years.
Additionally, we can assess Kasbah Resources’s loss by looking at what’s going on in the industry on top of within the company. First, I want to quickly look into the line items. Revenue growth over the last few years has been negative at -38.96%. The key to profitability here is to make sure the company’s cost growth is well-managed. Eyeballing growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a muted single-digit rate of 7.36% in the past year, and 8.50% over the past five. This means any tailwind the industry is deriving benefit from, Kasbah Resources has not been able to reap as much as its industry peers.
What does this mean?
Kasbah 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 predict what will happen in the future and when. The most valuable step is to assess company-specific issues Kasbah Resources may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Kasbah Resources to get a more holistic view of the stock by looking at:
1. Financial Health: Is KAS’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.