In this commentary, I will examine Alexium International Group Limited’s (ASX:AJX) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the chemicals industry performed. As an investor, I find it beneficial to assess AJX’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. Check out our latest analysis for Alexium International Group
How AJX fared against its long-term earnings performance and its industry
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 similar basis, using the latest information. For Alexium International Group, its most recent earnings (trailing twelve month) is -AU$8.40M, which, in comparison to the prior year’s level, has become less negative. Since these values may be somewhat nearsighted, I have calculated an annualized five-year value for Alexium International Group’s earnings, which stands at -AU$7.39M. This suggests that, Alexium International Group has historically performed better than recently, while it seems like earnings are now heading back towards to right direction again.
We can further evaluate Alexium International Group’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Alexium International Group’s top-line has grown by 67.10% on average, implying that the company is in a high-growth period with expenses shooting ahead of revenues, leading to annual losses. Scanning growth from a sector-level, the Australian chemicals industry has been growing its average earnings by double-digit 11.13% over the previous year, and a less exciting 9.30% over the past five. This shows that, although Alexium International Group is currently running a loss, it may have been aided by industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Though Alexium International Group’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to forecast what will happen in the future and when. The most valuable step is to examine company-specific issues Alexium International Group may be facing and whether management guidance has steadily been met in the past. You should continue to research Alexium International Group to get a more holistic view of the stock by looking at:
- Financial Health: Is AJX’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 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.