When African Battery Metals Plc (AIM:ABM) released its most recent earnings update (31 March 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how African Battery Metals 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 ABM has performed. View our latest analysis for African Battery Metals
How ABM fared against its long-term earnings performance and its industry
I 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 many different companies on a more comparable basis, using the most relevant data points. For African Battery Metals, its latest earnings (trailing twelve month) is -£1.4M, which compared to the previous year’s figure, has become less negative. Since these values may be fairly short-term, I’ve determined an annualized five-year value for ABM’s net income, which stands at -£1.6M. This suggests that, though net income is negative, it has become less negative over the years.We can further analyze African Battery Metals’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade African Battery Metals has seen its revenue fall by more than half, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Viewing growth from a sector-level, the UK metals and mining industry has been growing its average earnings by double-digit 38.06% in the past twelve months, . This is a change from a volatile drop of -7.50% in the last few years. This means whatever tailwind the industry is benefiting from, African Battery Metals has not been able to leverage it as much as its industry peers.
What does this mean?
Though African Battery Metals’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to forecast what will happen in the future and when. The most insightful step is to assess company-specific issues African Battery Metals may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research African Battery Metals to get a better picture of the stock by looking at:
- 1. Financial Health: Is ABM’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.