Should You Be Content With Cullen Resources Limited’s (ASX:CUL) Earnings Growth?
In this article, I will take a look at Cullen Resources Limited’s (ASX:CUL) most recent earnings update (31 December 2017) and compare these latest figures against its performance over the past few years, along with how the rest of CUL’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. Check out our latest analysis for Cullen Resources
Did CUL’s recent earnings growth beat the long-term trend and the industry?
To account for any quarterly or half-yearly updates, 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 technique enables me to examine different companies on a similar basis, using new information. For Cullen Resources, its most recent bottom-line (trailing twelve month) is -AU$816.42K, which, in comparison to the previous year’s figure, has become less negative. Given that these values are somewhat short-term, I have computed an annualized five-year figure for Cullen Resources’s earnings, which stands at -AU$1.62M. This means even though net income is negative, it has become less negative over the years.
We can further assess Cullen Resources’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Cullen Resources has seen an annual decline in revenue of -36.46%, 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 Australian metals and mining industry has been growing its average earnings by double-digit 18.18% in the previous year, and a less exciting 8.68% over the previous five years. This shows that, even though Cullen Resources is presently unprofitable, it may have gained from industry tailwinds, moving earnings towards to right direction.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always hard to forecast what will occur going forward, and when. The most insightful step is to assess company-specific issues Cullen Resources may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Cullen Resources to get a better picture of the stock by looking at:
Financial Health: Is CUL’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.
Valuation: What is CUL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CUL is currently mispriced by the market.
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.
