When Ikwezi Mining Limited’s (ASX:IKW) announced its latest earnings (30 June 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Ikwezi Mining’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not IKW actually performed well. Below is a quick commentary on how I see IKW has performed. View our latest analysis for Ikwezi Mining
Was IKW weak performance lately part of a long-term decline?
I 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 enables me to assess many different companies on a similar basis, using the latest information. For Ikwezi Mining, its latest earnings is -A$0.3M, which, against the prior year’s level, has become more negative. Given that these values are fairly short-term, I have determined an annualized five-year figure for Ikwezi Mining’s net income, which stands at -A$2.0M. This means that, though net income is negative, it has become less negative over the years.Additionally, we can assess Ikwezi Mining’s loss by looking at what’s going on 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 increased by 40.43%, indicating that Ikwezi Mining is in a high-growth period with expenses racing ahead high top-line growth rates, leading to yearly losses. Looking at growth from a sector-level, the Australian oil and gas industry has been enduring some headwinds in the past twelve months, leading to an average earnings drop of -25.18%. This is a significant change, given that the industry has constantly been delivering a a strong growth of 28.17% in the previous few years. This means that any near-term headwind the industry is facing, it’s hitting Ikwezi Mining harder than its peers.
What does this mean?
Ikwezi Mining’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 envisage what will occur going forward, and when. The most useful step is to assess company-specific issues Ikwezi Mining may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Ikwezi Mining to get a more holistic view of the stock by looking at:
1. Financial Health: Is IKW’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. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.