For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Winmar Resources Limited (ASX:WFE) useful as an attempt to give more color around how Winmar Resources is currently performing. Check out our latest analysis for Winmar Resources
Were WFE’s earnings stronger than its past performances and the industry?
I look at 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 blend enables me to analyze various companies in a uniform manner using the latest information. For Winmar Resources, its most recent twelve-month earnings is -A$2.0M, which compared to last year’s figure, has become less negative. Since these values may be relatively nearsighted, I’ve estimated an annualized five-year figure for Winmar Resources’s earnings, which stands at -A$1.4M. This suggests that, Winmar Resources has historically performed better than recently, though it seems like earnings are now heading back towards to right direction again.
We can further assess Winmar Resources’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 negative at -8.58%. The key to profitability here is to make sure the company’s cost growth is well-managed. Scanning growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a unexciting single-digit rate of 7.36% over the prior year, and 8.50% over the past five years. This means that, though Winmar Resources is presently running a loss, it may have been aided by 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 hard to predict what will occur going forward, and when. The most useful step is to examine company-specific issues Winmar Resources may be facing and whether management guidance has consistently been met in the past. You should continue to research Winmar Resources to get a more holistic view of the stock by looking at:
1. Financial Health: Is WFE’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.