When Tanami Gold NL (ASX:TAM) released its most recent earnings update (30 June 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Tanami Gold’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not TAM actually performed well. Below is a quick commentary on how I see TAM has performed. View our latest analysis for Tanami Gold
How Well Did TAM Perform?
I use the ‘latest twelve-month’ data, 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 different companies on a similar basis, using the most relevant data points. For Tanami Gold, its most recent twelve-month earnings is -A$4.7M, which, relative to the previous year’s level, has turned from positive to negative. Given that these values are somewhat short-term thinking, I’ve created an annualized five-year figure for TAM’s net income, which stands at -A$13.4M. This shows that, although net income is negative, it has become less negative over the years.
Additionally, we can evaluate Tanami Gold’s loss by researching what has been happening in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last couple of years has been negative at -48.18%. The key to profitability here is to make sure the company’s cost growth is well-managed. Inspecting growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a muted single-digit rate of 7.36% over the previous year, and 8.50% over the past couple of years. This means any uplift the industry is deriving benefit from, Tanami Gold has not been able to realize the gains unlike its average peer.
What does this mean?
Though Tanami Gold’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to forecast what will occur going forward, and when. The most useful step is to examine company-specific issues Tanami Gold may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Tanami Gold to get a better picture of the stock by looking at:
1. Financial Health: Is TAM’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.