After reading AuStar Gold Limited’s (ASX:AUL) latest earnings update (30 June 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether AUL has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. Check out our latest analysis for AuStar Gold
Was AUL’s recent earnings decline indicative of a tough track record?
I like to use data from the most recent 12 months, 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 stocks on a more comparable basis, using the most relevant data points. For AuStar Gold, its most recent bottom-line (trailing twelve month) is -A$7.6M, which, relative to the prior year’s level, has become more negative. Since these figures are somewhat myopic, I have computed an annualized five-year value for AUL’s net income, which stands at -A$3.5M. This doesn’t look much better, since earnings seem to have consistently been getting more and more negative over time.Additionally, we can examine AuStar Gold’s loss by researching what has been happening in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over the past couple of years has grown by 29.58%, implying that AuStar Gold is in a high-growth period with expenses shooting ahead of high top-line growth rates, leading to yearly losses. Viewing growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a muted single-digit rate of 7.36% in the past year, and a substantial 11.48% over the past five years. This means that whatever uplift the industry is benefiting from, AuStar Gold has not been able to realize the gains unlike its average peer.
What does this mean?
AuStar Gold’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 hard to envisage what will occur going forward, and when. The most insightful step is to assess company-specific issues AuStar Gold may be facing and whether management guidance has consistently been met in the past. You should continue to research AuStar Gold to get a better picture of the stock by looking at:
1. Financial Health: Is AUL’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 trailing twelve months from 30 June 2017. This may not be consistent with full year annual report figures.