Today I will examine Great Lakes Graphite Inc’s (TSXV:GLK) latest earnings update (31 July 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of GLK’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 Great Lakes Graphite
Commentary On GLK’s Past Performance
I look at the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This allows me to examine different stocks on a more comparable basis, using the latest information. Great Lakes Graphite’s latest earnings -CA$3.2M, which, against the previous year’s figure, has become more negative. Since these values are relatively myopic, I’ve determined an annualized five-year value for GLK’s earnings, which stands at -CA$1.4M. This doesn’t look much better, as earnings seem to have gradually been getting more and more negative over time.We can further assess Great Lakes Graphite’s loss by researching what’s going on in the industry along with within the company. Firstly, I want to quickly look into the line items. Revenue growth over last couple of years has more than doubled, implying that Great Lakes Graphite is in a high-growth phase with expenses racing ahead high top-line growth rates. Looking at growth from a sector-level, the Canadian metals and mining industry has been growing its average earnings by double-digit 45.53% over the previous year, and 14.77% over the past five. This suggests that any tailwind the industry is deriving benefit from, Great Lakes Graphite has not been able to realize the gains unlike its industry peers.
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 forecast what will happen in the future and when. The most useful step is to examine company-specific issues Great Lakes Graphite may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Great Lakes Graphite to get a more holistic view of the stock by looking at:
1. Financial Health: Is GLK’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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.