Measuring DataDot Technology Limited’s (ASX:DDT) track record of past performance is a valuable exercise for investors. It allows 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 DDT’s recent performance announced on 31 December 2017 and compare these figures to its historical trend and industry movements. Check out our latest analysis for DataDot Technology
Were DDT’s earnings stronger than its past performances and the industry?
I like to 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 enables me to examine different stocks on a similar basis, using the most relevant data points. For DataDot Technology, its most recent earnings (trailing twelve month) is -AU$1.15M, which compared to last year’s figure, has become less negative. Since these figures are somewhat nearsighted, I’ve calculated an annualized five-year value for DDT’s net income, which stands at -AU$1.33M. This means that, even though net income is negative, it has become less negative over the years.We can further analyze DataDot Technology’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade DataDot Technology has seen an annual decline in revenue of -3.86%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the Australian auto components industry has been growing, albeit, at a subdued single-digit rate of 4.15% in the prior year, and a flatter -1.94% over the past five years. This means even though DataDot Technology is presently running a loss, whatever near-term headwind the industry is experiencing, DataDot Technology is less exposed compared to its peers.
What does this mean?
Though DataDot Technology’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to envisage what will occur going forward, and when. The most useful step is to examine company-specific issues DataDot Technology may be facing and whether management guidance has regularly been met in the past. You should continue to research DataDot Technology to get a more holistic view of the stock by looking at:
- 1. Financial Health: Is DDT’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. Valuation: What is DDT worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether DDT is currently mispriced by the market.
- 3. 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.