When Tanfield Group plc (AIM:TAN) announced its most recent earnings (30 June 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Tanfield Group performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see TAN has performed. View our latest analysis for Tanfield Group
How TAN fared against its long-term earnings performance and its industry
I look at 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 technique enables me to assess many different companies on a similar basis, using the most relevant data points. For Tanfield Group, its most recent trailing-twelve-month earnings is -UK£219.00K, which compared to the previous year’s figure, has become less negative. Since these values are relatively short-term thinking, I have estimated an annualized five-year value for Tanfield Group’s earnings, which stands at -UK£5.02M. This suggests that, despite the fact that net income is negative, it has become less negative over the years.We can further analyze Tanfield Group’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Tanfield Group has seen an annual decline in revenue of -63.58%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the UK capital markets industry has been growing its average earnings by double-digit 24.33% in the past twelve months, and 17.78% over the previous five years. This suggests that, although Tanfield Group is currently loss-making, it may have benefited from industry tailwinds, moving earnings in the right direction.
What does this mean?
Tanfield Group’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 difficult to envisage what will happen in the future and when. The most insightful step is to assess company-specific issues Tanfield Group may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Tanfield Group to get a better picture of the stock by looking at:
- 1. Financial Health: Is TAN’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.