Understanding how Kazakhstan Potash Corporation Limited (ASX:KPC) is performing as a company requires looking at more than just a years’ earnings. Today I will run you through a basic sense check to gain perspective on how Kazakhstan Potash is doing by comparing its latest earnings with its long-term trend as well as the performance of its metals and mining industry peers.Check out our latest analysis for Kazakhstan Potash
Did KPC beat its long-term earnings growth trend and its industry?
I prefer 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 various companies on a more comparable basis, using the latest information. For Kazakhstan Potash, its latest trailing-twelve-month earnings is -AU$10.55M, which, in comparison to last year’s level, has become less negative. Since these figures are relatively short-term, I’ve determined an annualized five-year value for Kazakhstan Potash’s net income, which stands at -AU$23.54M. This suggests that, though net income is negative, it has become less negative over the years.
We can further evaluate Kazakhstan Potash’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Kazakhstan Potash’s top-line has increased by 56.99% on average, implying that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Viewing growth from a sector-level, the Australian metals and mining industry has been growing its average earnings by double-digit 15.45% in the prior twelve months, and 13.08% over the last five years. This shows that, even though Kazakhstan Potash is presently unprofitable, it may have been aided by industry tailwinds, moving earnings towards to right direction.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most insightful step is to examine company-specific issues Kazakhstan Potash may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Kazakhstan Potash to get a more holistic view of the stock by looking at:
- 1. Financial Health: Is KPC’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 trailing twelve months from 30 June 2017. This may not be consistent with full year annual report figures.by