Are Earnings Prospects Improving For Loss-Making Alchemy Resources Limited’s (ASX:ALY)?
Today I will take a look at Alchemy Resources Limited’s (ASX:ALY) most recent earnings update (31 December 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the metals and mining industry performed. As an investor, I find it beneficial to assess ALY’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 Alchemy Resources
Did ALY beat its long-term earnings growth trend and its industry?
For the most up-to-date info, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method allows me to assess various companies on a similar basis, using the most relevant data points. For Alchemy Resources, its most recent earnings (trailing twelve month) is -AU$587.80K, which, against the previous year’s figure, has become less negative. Since these figures may be somewhat myopic, I’ve computed an annualized five-year figure for Alchemy Resources’s net income, which stands at -AU$1.82M. This means though net income is negative, it has become less negative over the years.
We can further evaluate Alchemy Resources’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Alchemy Resources has seen an annual decline in revenue of -10.42%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Viewing growth from a sector-level, the Australian metals and mining industry has been growing its average earnings by double-digit 20.13% over the previous twelve months, and 13.22% over the past five. This means that whatever uplift the industry is enjoying, Alchemy Resources has not been able to realize the gains unlike its industry peers.
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 difficult to forecast what will occur going forward, and when. The most insightful step is to assess company-specific issues Alchemy Resources may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Alchemy Resources to get a more holistic view of the stock by looking at:
Financial Health: Is ALY’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.
