Audalia Resources Limited (ASX:ACP): Does The Earnings Decline Make It An Underperformer?
Understanding Audalia Resources Limited’s (ASX:ACP) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Audalia Resources is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. See our latest analysis for Audalia Resources
How Well Did ACP Perform?
I like to 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 allows me to examine different companies on a more comparable basis, using the most relevant data points. For Audalia Resources, its latest trailing-twelve-month earnings is -AU$2.19M, which, against the prior year’s figure, has become more negative. Given that these figures are relatively short-term thinking, I have computed an annualized five-year value for ACP’s earnings, which stands at -AU$785.05K. This doesn’t seem to paint a better picture, since earnings seem to have gradually been getting more and more negative over time.
We can further evaluate Audalia Resources’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Audalia Resources has seen an annual decline in revenue of -23.25%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Scanning growth from a sector-level, the Australian metals and mining industry has been growing its average earnings by double-digit 15.38% in the prior year, and 12.92% over the past half a decade. This shows that any tailwind the industry is profiting from, Audalia Resources has not been able to gain as much as its industry peers.
What does this mean?
Audalia Resources’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 hard to envisage what will happen in the future and when. The most useful step is to assess company-specific issues Audalia Resources may be facing and whether management guidance has dependably been met in the past. You should continue to research Audalia Resources to get a better picture of the stock by looking at:
1. Financial Health: Is ACP’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 31 December 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.
