For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on African Battery Metals Plc (AIM:ABM) useful as an attempt to give more color around how African Battery Metals is currently performing. Check out our latest analysis for African Battery Metals
Was ABM’s weak performance lately a part of a long-term decline?
I use 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 technique allows me to examine different stocks on a more comparable basis, using the latest information. For African Battery Metals, its most recent earnings (trailing twelve month) is -UK£3.94M, which, in comparison to last year’s level, has become more negative. Given that these values may be somewhat short-term, I’ve computed an annualized five-year value for African Battery Metals’s earnings, which stands at -UK£1.77M. This doesn’t look much better, as earnings seem to have consistently been getting more and more negative over time.
We can further examine 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? Looking at growth from a sector-level, the UK metals and mining industry has been growing its average earnings by double-digit 28.48% over the prior year, . This is a turnaround from a volatile drop of -3.37% in the previous few years. This suggests that any tailwind the industry is benefiting from, African Battery Metals has not been able to reap 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 envisage what will happen in the future and when. The most useful step is to examine company-specific issues African Battery Metals may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research African Battery Metals to get a better picture of the stock by looking at:
- 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.
- 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 September 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.