Gold Resource Corp (NYSEMKT:GORO): Has Recent Earnings Growth Beaten Long-Term Trend?

Andy Nguyen
Updated

After reading Gold Resource Corp’s (AMEX:GORO) most recent earnings announcement (30 September 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. See our latest analysis for Gold Resource

Could GORO beat the long-term trend and outperform its industry?

To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to assess many different companies on a similar basis, using the most relevant data points. For Gold Resource, its latest trailing-twelve-month earnings is US$6.21M, which, relative to the prior year’s level, has increased by a somewhat soft 9.60%. Since these values are relatively short-term thinking, I have determined an annualized five-year figure for GORO’s net income, which stands at US$16.86M This shows that, despite the fact that earnings increased from last year’s level, over the past couple of years, Gold Resource’s earnings have been falling on average.

AMEX:GORO Income Statement Mar 5th 18
AMEX:GORO Income Statement Mar 5th 18

Why could this be happening? Well, let’s look at what’s occurring with margins and if the rest of the industry is feeling the heat. Although revenue growth over the past few years, has been negative, earnings growth has been falling by even more, meaning Gold Resource has been ramping up its expenses. This harms margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US metals and mining industry has been ramping up average earnings growth of 53.03% over the previous year, and a flatter -0.20% over the past five. This means that, in the recent industry expansion, Gold Resource has not been able to leverage it as much as its average peer.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There could be factors that are impacting the entire industry thus the high industry growth rate over the same time frame. You should continue to research Gold Resource to get a more holistic view of the stock by looking at:

  • 1. Financial Health: Is GORO’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. Valuation: What is GORO worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether GORO is currently mispriced by the market.

  • 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 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.