Measuring Industrial Services of America, Inc.’s (NASDAQ:IDSA) track record of past performance is a useful exercise for investors. It enables us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess IDSA’s recent performance announced on 31 March 2019 and weigh these figures against its long-term trend and industry movements.
Have IDSA’s earnings improved against past performances and the industry?
IDSA is loss-making, with the most recent trailing twelve-month earnings of -US$826.0k (from 31 March 2019), which compared to last year has become more negative. However, the company’s loss seem to be contracting over the medium term, with the five-year earnings average of -US$6.3m. Each year, for the past five years IDSA has seen an annual decline in revenue of -19%, on average. This adverse movement is a driver of the company’s inability to reach breakeven.
Eyeballing growth from a sector-level, the US commercial services industry has been growing, albeit, at a unexciting single-digit rate of 6.1% over the prior year,
Given that Industrial Services of America is not profitable, even if operating expenses (SG&A and one-year R&D) continues to fall at previous year’s rate of -16%, the company’s current cash level (US$469k) will still be insufficient to cover its expenses in the upcoming year. This is not a great sign in terms of operations and cash management. Although this is a relatively simplistic calculation, and Industrial Services of America may continue to reduce its costs further or raise debt capital instead of coming to equity markets, the outcome of this analysis still helps us understand how sustainable the Industrial Services of America’s operation is, and when things may have to change.
What does this mean?
Though Industrial Services of America’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to envisage what will happen in the future and when. The most valuable step is to examine company-specific issues Industrial Services of America may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Industrial Services of America to get a more holistic view of the stock by looking at:
- Financial Health: Are IDSA’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 31 March 2019. This may not be consistent with full year annual report figures.
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