Does Spectrum Rare Earths Limited’s (ASX:SPX) Past Performance Indicate A Stronger Future?
Measuring Spectrum Rare Earths Limited’s (ASX:SPX) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess SPX’s recent performance announced on 30 June 2017 and compare these figures to its historical trend and industry movements. See our latest analysis for SPX
Were SPX’s earnings stronger than its past performances and the industry?
I prefer 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 enables me to examine many different companies on a similar basis, using the most relevant data points. For Spectrum Rare Earths, the most recent earnings -A$0.2M, which, relative to the prior year’s figure, has become less negative. Given that these values may be somewhat nearsighted, I’ve estimated an annualized five-year value for SPX’s net income, which stands at -A$2.2M. This shows that, while net income is negative, it has become less negative over the years.
Additionally, we can evaluate Spectrum Rare Earths’s loss by researching what has been happening in the industry as well as within the company. Initially, I want to quickly look into the line items. Revenue growth over last couple of years has grew by 52.95%, indicating that Spectrum Rare Earths is in a high-growth phase with expenses shooting ahead of high top-line growth rates. Scanning growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a subdued single-digit rate of 6.76% over the past year, and a substantial 11.62% over the previous few years. This means while Spectrum Rare Earths is presently running a loss, it may have gained from industry tailwinds, moving earnings towards to right direction.
What does this mean?
Spectrum Rare Earths’s track record can be a valuable insight into its earnings performance, but it certainly 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 useful step is to examine company-specific issues Spectrum Rare Earths may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Spectrum Rare Earths to get a more holistic view of the stock by looking at:
1. Financial Health: Is SPX’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. 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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.
