After reading Digitalist Group Plc’s (HEL:DIGIGR) most recent earnings announcement (30 September 2018), 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 pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Digitalist Group’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
How Well Did DIGIGR Perform?
DIGIGR is loss-making, with the most recent trailing twelve-month earnings of -€7.2m (from 30 September 2018), 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 -€10.3m. Each year, for the past five years DIGIGR has seen an annual decline in revenue of -11%, on average. This adverse movement is a driver of the company’s inability to reach breakeven.
Viewing growth from a sector-level, the FI it industry has been growing its average earnings by double-digit 14% in the prior twelve months,
Given that Digitalist Group is not profitable, even if operating expenses (SG&A and one-year R&D) continues to fall at previous year’s rate of -25%, the company’s current cash level (€706k) 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 Digitalist Group may continue to reduce its costs further or open a new line of credit instead of issuing new equity shares, the outcome of this analysis still helps us understand how sustainable the Digitalist Group’s operation is, and when things may have to change.
What does this mean?
Digitalist Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always hard to predict what will happen in the future and when. The most useful step is to assess company-specific issues Digitalist Group may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Digitalist Group to get a more holistic view of the stock by looking at:
- Financial Health: Are DIGIGR’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 September 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.