For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on AuStar Gold Limited (ASX:AUL) useful as an attempt to give more color around how AuStar Gold is currently performing. View our latest analysis for AuStar Gold
How AUL fared against its long-term earnings performance and its 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 enables me to examine many different companies on a similar basis, using the most relevant data points. For AuStar Gold, its latest earnings (trailing twelve month) is -AU$2.42M, which, against the previous year’s level, has become less negative. Given that these figures are relatively short-term thinking, I’ve determined an annualized five-year figure for AuStar Gold’s net income, which stands at -AU$3.61M. This means even though net income is negative, it has become less negative over the years.We can further evaluate AuStar Gold’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years AuStar Gold’s top-line has grown by 40.90% on average, implying that the company is in a high-growth phase with expenses shooting ahead of revenues, leading to annual losses. Inspecting growth from a sector-level, the Australian metals and mining industry has been growing its average earnings by double-digit 18.18% over the past twelve months, and a less exciting 8.68% over the previous five years. This shows that, despite the fact that AuStar Gold is currently loss-making, it may have been aided by industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Though AuStar 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 predict what will occur going forward, and when. The most valuable 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 more holistic view of the stock by looking at:
- 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.
- 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.