In this article, I will take a look at West Wits Mining Limited’s (ASX:WWI) most recent earnings update (30 June 2017) and compare these latest figures against its performance over the past few years, along with how the rest of WWI’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. See our latest analysis for West Wits Mining
Did WWI beat its long-term earnings growth trend and its industry?
For the most up-to-date info, I use data from the most recent 12 months, 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 assess various companies on a more comparable basis, using the most relevant data points. For West Wits Mining, its latest trailing-twelve-month earnings is -A$0.6M, which compared to the previous year’s figure, has become less negative. Given that these values are fairly short-term thinking, I have computed an annualized five-year figure for WWI’s earnings, which stands at -A$1.4M. This means that, while net income is negative, it has become less negative over the years.Additionally, we can examine West Wits Mining’s loss by researching what’s going on in the industry as well as within the company. Initially, I want to briefly look into the line items. Revenue growth over the past couple of years has been negative at -12.89%. The key to profitability here is to make sure the company’s cost growth is well-managed. Scanning growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a muted single-digit rate of 7.36% over the prior year, and a substantial 11.48% over the past couple of years. This means while West Wits Mining is presently loss-making, it may have been aided by industry tailwinds, moving earnings towards to right direction.
What does this mean?
Though West Wits Mining’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to predict what will occur going forward, and when. The most insightful step is to assess company-specific issues West Wits Mining may be facing and whether management guidance has regularly been met in the past. You should continue to research West Wits Mining to get a better picture of the stock by looking at:
1. Financial Health: Is WWI’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.