When Centamin plc (LSE:CEY) released its most recent earnings update (31 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Centamin has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see CEY has performed. View our latest analysis for Centamin
How Did CEY’s Recent Performance Stack Up Against Its Past?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to assess different stocks in a uniform manner using the latest information. For Centamin, its most recent earnings (trailing twelve month) is US$109.40M, which compared to the prior year’s figure, has sunken by a large -49.06%. Since these values are fairly short-term, I’ve calculated an annualized five-year figure for Centamin’s earnings, which stands at US$143.38M This doesn’t look much better, as earnings seem to have steadily been deteriorating over the longer term.
Why is this? Well, let’s take a look at what’s going on with margins and if the rest of the industry is experiencing the hit as well. Revenue growth over the last couple of years, has been positive, nevertheless earnings growth has been deteriorating. This implies that Centamin has been ramping up expenses, which is harming margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the UK metals and mining industry has been growing its average earnings by double-digit 38.06% in the previous year, . This is a turnaround from a volatile drop of -7.50% in the previous couple of years. This suggests that, in the recent industry expansion, Centamin has not been able to leverage it as much as its industry peers.
What does this mean?
Though Centamin’s past data is helpful, it is only one aspect of my investment thesis. Typically companies that face a drawn out period of reduction in earnings are going through some sort of reinvestment phase in order to keep up with the latest industry disruption and expansion. You should continue to research Centamin to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for CEY’s future growth? Take a look at our free research report of analyst consensus for CEY’s outlook.
- 2. Financial Health: Is CEY’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.
- 3. 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.