In this article, I will take a look at MRG Metals Ltd’s (ASX:MRQ) most recent earnings update (31 December 2017) and compare these latest figures against its performance over the past few years, along with how the rest of MRQ’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. View our latest analysis for MRG Metals
Could MRQ beat the long-term trend and outperform its industry?
I prefer to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This enables me to analyze various companies in a uniform manner using new information. For MRG Metals, its most recent bottom-line (trailing twelve month) is -AU$253.31K, which, relative to the previous year’s figure, has become less negative. Since these values are fairly short-term thinking, I have determined an annualized five-year figure for MRG Metals’s net income, which stands at -AU$2.37M. This suggests that, although net income is negative, it has become less negative over the years.We can further analyze MRG Metals’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years MRG Metals has seen an annual decline in revenue of -38.39%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Eyeballing growth from a sector-level, the Australian metals and mining industry has been growing its average earnings by double-digit 20.13% over the previous year, and 13.22% over the last five years. This means despite the fact that MRG Metals is presently loss-making, it may have benefited from industry tailwinds, moving earnings into a more favorable position.
What does this mean?
MRG Metals’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to envisage what will occur going forward, and when. The most useful step is to examine company-specific issues MRG Metals may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research MRG Metals to get a more holistic view of the stock by looking at:
- Financial Health: Is MRQ’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.