DynaResource, Inc. :DYNR-US: Earnings Analysis: Q3, 2017 By the Numbers : January 8, 2018

DynaResource, Inc. reports financial results for the quarter ended September 30, 2017.

Highlights

  • Summary numbers: Revenues of USD 2.67 million, Net Earnings of USD 0.73 million.
  • Gross margins narrowed from 45.65% to 17.65% compared to the same period last year, operating (EBITDA) margins now -4.01% from 25.04%.
  • Change in operating cash flow of -127.55% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 2.67 3.22 1.34 1.3 3.03
Revenue Growth (%YOY) -11.67 1.93 -33.2 62.1 0
Earnings (mil) 0.73 0.05 2.38 1.63 0.04
Earnings Growth (%YOY) 1918.64 110.66 220.67 153.78 101
Net Margin (%) 27.22 1.53 177.54 125.1 1.19
EPS -0 0 0.13 0.08 -0
Return on Equity (%) 20.32 0.25 101.05 102.59 -0.29
Return on Assets (%) 27.47 2.12 105.64 69.48 1.58

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, DYNR-US’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 DYNR-US’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 -16.90% and earnings by 1,377.01% compared to the previous period.

Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 17.65% to 45.65% for the same period last year, while operating margins (EBITDA margins) went from -4.01% to 25.04% over the same time frame.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

DYNR-US’s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently -51.41 days, compared to last year’s level of -107.74 days.

Cash Versus Earnings – Sustainable Performance?

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

DYNR-US’s year-on-year change in operating cash flow of -127.55% 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 operating (EBIT) margins contracted from 24.07% to -5.39%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from 1.12% to 29.07%.

EBIT Margin History
PreTax Margin History

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Company Profile

DynaResource, Inc. is a minerals investment, management and exploration company, which engages in acquiring, investing and developing precious metal properties. It also conducts test mining and pilot milling operations through an operating subsidiary in Mexico. The company holds interest in San Jose de Gracia project. DynaResource was founded on September 28, 1937 and is headquartered in Irving, TX.

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