After reading ECR Minerals plc’s (AIM:ECR) latest earnings update (30 September 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether ECR has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. View our latest analysis for ECR Minerals
Did ECR’s recent earnings growth beat the long-term trend and the industry?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, 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 blend allows me to assess different stocks on a more comparable basis, using the most relevant data points. For ECR Minerals, its latest trailing-twelve-month earnings is -UK£511.12K, which, in comparison to last year’s level, has become less negative. Since these figures may be fairly short-term thinking, I have computed an annualized five-year figure for ECR Minerals’s earnings, which stands at -UK£2.30M. This means while net income is negative, it has become less negative over the years.
We can further evaluate ECR Minerals’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years ECR Minerals has seen its revenue fall by more than half, 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 UK metals and mining industry has been growing its average earnings by double-digit 28.48% over the prior twelve months, . This is a turnaround from a volatile drop of -3.33% in the past couple of years. This shows that, although ECR Minerals is currently unprofitable, it may have only just gained from the recent industry expansion, moving earnings in the right direction.
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 forecast what will happen in the future and when. The most useful step is to assess company-specific issues ECR Minerals may be facing and whether management guidance has regularly been met in the past. You should continue to research ECR Minerals to get a more holistic view of the stock by looking at:
- Financial Health: Is ECR’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 30 September 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.