Stonewall Resources Limited (ASX:SWJ): Does 16.8% EPS Decline Lately Make It An Underperformer?
Today I will take a look at Stonewall Resources Limited’s (ASX:SWJ) most recent earnings update (30 June 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 SWJ’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 Stonewall Resources
Did SWJ perform worse than its track record and industry?
I like to 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 technique allows me to examine different stocks on a similar basis, using new information. Stonewall Resources’s latest earnings -$5.6M, which compared to the prior year’s level, has become more negative. Since these values are somewhat short-term thinking, I have calculated an annualized five-year value for SWJ’s earnings, which stands at -$8.3M. This means while net income is negative, it has become less negative over the years.
We can further analyze Stonewall Resources’s loss by researching what’s going on in the industry along with within the company. Initially, I want to quickly look into the line items. Revenue growth over past couple of years has been negative at -9.90%. The key to profitability here is to make sure the company’s cost growth is well-managed. Inspecting growth from a sector-level, the Australian metals and mining industry has been growing, albeit, at a unexciting single-digit rate of 6.76% over the prior year, and a substantial 10.06% over the previous five years. This suggests that whatever uplift the industry is enjoying, Stonewall Resources has not been able to leverage it as much as 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 hard to envisage what will occur going forward, and when. The most useful step is to examine company-specific issues Stonewall Resources may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Stonewall Resources to get a more holistic view of the stock by looking at:
1. Financial Health: Is SWJ’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.
