Should You Be Content With Rumble Resources Limited’s (ASX:RTR) Earnings Growth?
After looking at Rumble Resources Limited’s (ASX:RTR) latest earnings update (30 June 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. View our latest analysis for Rumble Resources
Commentary On RTR’s Past Performance
I use data from the most recent 12 months, 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 allows me to analyze various companies in a uniform manner using the latest information. For Rumble Resources, its latest earnings (trailing twelve month) is -A$0.8M, which compared to last year’s level, has become less negative. Since these values may be relatively nearsighted, I have created an annualized five-year figure for RTR’s net income, which stands at -A$1.7M. This means despite the fact that net income is negative, it has become less negative over the years.
We can further evaluate Rumble Resources’s loss by researching what’s going on in the industry as well as within the company. Firstly, I want to quickly look into the line items. Revenue growth over the last couple of years has been negative at -3.75%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Inspecting growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a unexciting single-digit rate of 7.36% over the prior twelve months, and a substantial 11.48% over the past five years. This means even though Rumble Resources is presently running a loss, it may have been aided by industry tailwinds, moving earnings in the right direction.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to forecast what will occur going forward, and when. The most insightful step is to examine company-specific issues Rumble Resources may be facing and whether management guidance has dependably been met in the past. You should continue to research Rumble Resources to get a more holistic view of the stock by looking at:
1. Financial Health: Is RTR’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. Valuation: What is RTR 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 RTR is currently mispriced by the market.
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 30 June 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.
