When Sunstone Metals Limited (ASX:STM) released its most recent earnings update (31 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Sunstone Metals has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see STM has performed. View out our latest analysis for Sunstone Metals
Commentary On STM’s Past PerformanceSTM is loss-making, with the most recent trailing twelve-month earnings of -AU$1.97m (from 31 December 2017), which compared to last year has become less negative. Furthermore, the company’s loss seem to be growing over time, with the five-year earnings average of -AU$3.51m. Each year, for the past five years STM has seen an annual decline in revenue of -17.55%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. 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 year, and a more muted 8.68% over the last five years. This means that whatever tailwind the industry is profiting from, Sunstone Metals has not been able to leverage it as much as its industry peers.
Even though Sunstone Metals is currently unprofitable, it has an ample cash cushion (AU$5.49m) to pay for its upcoming operating expenses over the next couple of years. This is a good sign of business sustainability going forward.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to predict what will occur going forward, and when. The most insightful step is to assess company-specific issues Sunstone Metals may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Sunstone Metals to get a more holistic view of the stock by looking at:
- Financial Health: Is STM’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.