Comet Industries Ltd. :CMU-CA: Earnings Analysis: Q3, 2018 By the Numbers : January 1, 2018

Comet Industries Ltd. reports financial results for the quarter ended October 31, 2017.

Highlights

  • Summary numbers: Revenues of CAD 0.14 million, Net Earnings of CAD 0.02 million.
  • Gross margins widened from 80.86% to 82.61% compared to the same period last year, operating (EBITDA) margins now 17.54% from 16.56%.
  • Change in operating cash flow of 966.69% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-10-31 2017-07-31 2017-04-30 2017-01-31 2016-10-31
Relevant Numbers (Quarterly)
Revenues (mil) 0.14 0.13 0.13 0.12 0.12
Revenue Growth (%YOY) 10.38 4.24 5 9.47 6.42
Earnings (mil) 0.02 0.01 0.03 -0.02 0.02
Earnings Growth (%YOY) 14.91 20.87 18.71 -18.12 -87.89
Net Margin (%) 16.89 6.48 25.3 -17.74 16.22
EPS 0.01 0 0.01 -0.01 0
Return on Equity (%) 2.22 0.83 3.25 -2.2 2.01
Return on Assets (%) 4.15 1.53 5.91 -4.01 3.65

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, CMU-CA’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if CMU-CA’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 4.63% and earnings by 172.87% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 80.86% to 82.61% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 16.56% to 17.54% compared to the same period last year. For comparison, gross margins were 75.70% and EBITDA margins were 7.75% in the last reporting period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

CMU-CA’s year-on-year change in operating cash flow of 966.69% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 16.26% to 17.28% and (2) one-time items. The company’s pretax margins are now 17.28% compared to 16.26% for the same period last year.

EBIT Margin History
PreTax Margin History

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Company Profile

Comet Industries Ltd. engages in the provision of mineral exploration. It involves in the operation of five Crown Granted known as Iron Mask property located in southwest Kamloops. The company was founded on January 1, 1950 and is headquartered in Vancouver, Canada.

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