Investors with a long-term horizong may find it valuable to assess Core Exploration Limited’s (ASX:CXO) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Core Exploration is currently performing. See our latest analysis for Core Exploration
Despite a decline, did CXO underperform the long-term trend and the industry?CXO is loss-making, with the most recent trailing twelve-month earnings of -AU$2.38m (from 31 December 2017), which compared to last year has become more negative. However, the company’s loss seem to be contracting over the medium term, with the five-year earnings average of -AU$1.55m. Each year, for the past five years CXO has seen an annual increase in operating expense growth, outpacing revenue growth of 26.20%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Looking at growth from a sector-level, the Australian metals and mining industry has been growing its average earnings by double-digit 18.18% over the prior twelve months, and a less exciting 8.68% over the last five years. This means any tailwind the industry is benefiting from, Core Exploration has not been able to realize the gains unlike its average peer.
Even though Core Exploration is currently unprofitable, it has an ample cash cushion (AU$4.58m) to pay for its upcoming operating expenses over the next couple of years. This is a strong indication of good cash management.
What does this mean?
Though Core Exploration’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to forecast what will happen in the future and when. The most useful step is to examine company-specific issues Core Exploration may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Core Exploration to get a more holistic view of the stock by looking at:
- Financial Health: Is CXO’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.