Understanding Yancoal Australia Ltd’s (ASX:YAL) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Yancoal Australia is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. See our latest analysis for Yancoal Australia
How YAL fared against its long-term earnings performance and its industry
I prefer to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique enables me to assess different companies on a more comparable basis, using the latest information. For Yancoal Australia, its most recent bottom-line (trailing twelve month) is -A$60.5M, which, relative to the prior year’s figure, has become less negative. Given that these values are relatively short-term, I have created an annualized five-year value for YAL’s earnings, which stands at -A$205.9M. This means that, despite the fact that net income is negative, it has become less negative over the years.
We can further examine Yancoal Australia’s loss by researching what has been happening in the industry as well as within the company. Initially, I want to quickly look into the line items. Revenue growth over the past couple of years has been somewhat muted, remaining flat on average at -1.38%. Given that top-line growth is also pretty flat, the key to profitability going forward would be controlling cost growth rates. Inspecting growth from a sector-level, the Australian oil and gas industry has been enduring some headwinds over the previous year, leading to an average earnings drop of -25.18%. This is a momentous change, given that the industry has constantly been delivering a a strong growth of 28.17% in the past couple of years. This shows that although Yancoal Australia is currently unprofitable, any recent headwind the industry is facing, the impact on Yancoal Australia has been softer relative to its peers.
What does this mean?
Yancoal Australia’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 Yancoal Australia may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Yancoal Australia to get a more holistic view of the stock by looking at: