Examining Kula Gold Limited’s (ASX:KGD) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess KGD’s latest performance announced on 30 June 2017 and weigh these figures against its longer term trend and industry movements. See our latest analysis for KGD
Did KGD’s recent EPS Growth beat the long-term trend and the industry?
I like to 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 allows me to analyze many different companies in a uniform manner using new information. For Kula Gold, the most recent earnings -A$6.6M, which, against the prior year’s level, has become less negative. Given that these values are fairly nearsighted, I have created an annualized five-year value for KGD’s net income, which stands at -A$18.2M. This means despite the fact that net income is negative, it has become less negative over the years.
We can further examine Kula Gold’s loss by looking at what has been happening in the industry as well as within the company. Initially, I want to briefly look into the line items. Revenue growth over last couple of years has been negative at -59.48%. The key to profitability here is to make sure the company’s cost growth is well-managed. Looking at 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 shows that, even though Kula Gold is currently loss-making, 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. Companies that incur net loss is always difficult to envisage what will happen in the future and when. The most useful step is to assess company-specific issues Kula Gold may be facing and whether management guidance has regularly been met in the past. You should continue to research Kula Gold to get a better picture of the stock by looking at:
1. Financial Health: Is KGD’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.
2. Valuation: What is KGD worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether KGD is currently mispriced by the market.