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Does Clean TeQ Holdings Limited's (ASX:CLQ) Past Performance Indicate A Weaker Future?

Simply Wall St

When Clean TeQ Holdings Limited (ASX:CLQ) released its most recent earnings update (31 December 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Clean TeQ Holdings's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not CLQ actually performed well. Below is a quick commentary on how I see CLQ has performed.

See our latest analysis for Clean TeQ Holdings

Was CLQ's weak performance lately a part of a long-term decline?

CLQ is loss-making, with the most recent trailing twelve-month earnings of -AU$18.9m (from 31 December 2019), which compared to last year has become more negative. Furthermore, the company's loss seem to be growing over time, with the five-year earnings average of -AU$11.4m. Each year, for the past five years CLQ has seen an annual increase in operating expense growth, outpacing revenue growth of 42%, on average. This adverse movement is a driver of the company's inability to reach breakeven.

Scanning growth from a sector-level, the Australian commercial services industry has been growing, albeit, at a subdued single-digit rate of 3.0% in the past year, and a substantial 17% over the past five years. This growth is a median of profitable companies of 11 Commercial Services companies in AU including AMA Group, Mader Group and SG Fleet Group. This shows that any near-term headwind the industry is experiencing, it’s hitting Clean TeQ Holdings harder than its peers.

ASX:CLQ Income Statement May 7th 2020
ASX:CLQ Income Statement May 7th 2020

Even though Clean TeQ Holdings is currently unprofitable, its has a long cash runway to meet its upcoming operating expenses should this remain constant at the current level of AU$4.3m (SG&A and one-year R&D) . This is a strong indication of good cash management.

What does this mean?

Clean TeQ Holdings'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 difficult to predict what will occur going forward, and when. The most insightful step is to assess company-specific issues Clean TeQ Holdings may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Clean TeQ Holdings to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for CLQ’s future growth? Take a look at our free research report of analyst consensus for CLQ’s outlook.

  2. Financial Health: Are CLQ’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 2019. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.