After looking at Advanced Braking Technology Limited’s (ASX:ABV) latest earnings announcement (31 December 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. 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 Advanced Braking Technology’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. View our latest analysis for Advanced Braking Technology
How ABV fared against its long-term earnings performance and its industry
I use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method allows me to assess different companies on a more comparable basis, using the most relevant data points. For Advanced Braking Technology, its latest trailing-twelve-month earnings is -AU$771.00K, which, against the previous year’s level, has become less negative. Since these figures are fairly nearsighted, I’ve computed an annualized five-year figure for Advanced Braking Technology’s net income, which stands at -AU$1.95M. This suggests that, despite the fact that net income is negative, it has become less negative over the years.We can further assess Advanced Braking Technology’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Advanced Braking Technology’s revenue growth has been somewhat subdued, with an annual growth rate of -0.43%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Viewing growth from a sector-level, the Australian auto components industry has been growing, albeit, at a subdued single-digit rate of 4.15% over the previous twelve months, and a flatter -1.94% over the last five years. This shows that though Advanced Braking Technology is presently unprofitable, whatever near-term headwind the industry is enduring, Advanced Braking Technology is relatively better-cushioned than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to predict what will happen in the future and when. The most useful step is to examine company-specific issues Advanced Braking Technology may be facing and whether management guidance has dependably been met in the past. You should continue to research Advanced Braking Technology to get a better picture of the stock by looking at:
- 1. Financial Health: Is ABV’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.
- 2. 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.