For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on MagneGas Corporation (NASDAQ:MNGA) useful as an attempt to give more color around how MagneGas is currently performing. View our latest analysis for MagneGas
How Did MNGA’s Recent Performance Stack Up Against Its Past?
I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to assess different companies on a more comparable basis, using the most relevant data points. For MagneGas, its latest earnings (trailing twelve month) is -US$12.10M, which, relative to last year’s level, has become less negative. Given that these figures are fairly nearsighted, I’ve estimated an annualized five-year figure for MagneGas’s net income, which stands at -US$8.51M. This means that, MagneGas has historically performed better than recently, despite the fact that it seems like earnings are now heading back towards a more favorable position once more.
We can further evaluate MagneGas’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade MagneGas’s top-line has increased by 35.14% on average, implying that the company is in a high-growth phase with expenses shooting ahead of revenues, leading to annual losses. Scanning growth from a sector-level, the US chemicals industry has been growing its average earnings by double-digit 14.36% in the previous year, and a less exciting 6.34% over the last five years. This means that, even though MagneGas is currently unprofitable, it may have benefited from industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Though MagneGas’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most insightful step is to assess company-specific issues MagneGas may be facing and whether management guidance has dependably been met in the past. You should continue to research MagneGas to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for MNGA’s future growth? Take a look at our free research report of analyst consensus for MNGA’s outlook.
- 2. Financial Health: Is MNGA’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 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.