Clean TeQ Holdings Limited (ASX:CLQ): Does The Earnings Decline Make It An Underperformer?
When Clean TeQ Holdings Limited (ASX:CLQ) released its most recent earnings update (30 June 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Clean TeQ Holdings has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see CLQ has performed.
Check out our latest analysis for Clean TeQ Holdings
How Did CLQ's Recent Performance Stack Up Against Its Past?
CLQ is loss-making, with the most recent trailing twelve-month earnings of -AU$17.9m (from 30 June 2019), which compared to last year has become more negative. Furthermore, the company's loss seem to be growing over time, with the five-year earnings average of -AU$10.4m. Each year, for the past five years CLQ has seen an annual increase in operating expense growth, outpacing revenue growth of 51%, on average. This adverse movement is a driver of the company's inability to reach breakeven.
Eyeballing growth from a sector-level, the Australian commercial services industry has been growing its average earnings by double-digit 20% in the past year, and a more subdued 9.4% over the past half a decade. This growth is a median of profitable companies of 12 Commercial Services companies in AU including Bingo Industries, Brambles and SG Fleet Group. This means any uplift the industry is benefiting from, Clean TeQ Holdings has not been able to reap as much as its average peer.
Although Clean TeQ Holdings is loss-making, it has an ample cash cushion (AU$79m) to pay for its upcoming operating expenses over the next couple of years. This is a good sign of business sustainability going forward.
What does this mean?
Though Clean TeQ Holdings'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 occur going forward, and when. The most valuable step is to examine company-specific issues Clean TeQ Holdings may be facing and whether management guidance has regularly been met in the past. You should continue to research Clean TeQ Holdings to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CLQ’s future growth? Take a look at our free research report of analyst consensus for CLQ’s outlook.
Financial Health: Are CLQ’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 June 2019. This may not be consistent with full year annual report figures.
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