N1 Holdings Limited (ASX:N1H): Should The Recent Earnings Drop Worry You?

Examining N1 Holdings Limited’s (ASX:N1H) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess N1H’s latest performance announced on 31 December 2017 and weigh these figures against its longer term trend and industry movements. Check out our latest analysis for N1 Holdings

Was N1H’s recent earnings decline worse than the long-term trend and the industry?

For the purpose of this commentary, 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 technique allows me to analyze different stocks on a more comparable basis, using new information. For N1 Holdings, its latest earnings (trailing twelve month) is -AU$1.48M, which, in comparison to the prior year’s level, has become more negative. Since these values may be relatively short-term thinking, I’ve determined an annualized five-year value for N1H’s net income, which stands at -AU$778.81K. This doesn’t seem to paint a better picture, as earnings seem to have consistently been getting more and more negative over time.

ASX:N1H Income Statement Apr 6th 18
ASX:N1H Income Statement Apr 6th 18
We can further analyze N1 Holdings’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years N1 Holdings’s top-line has risen by 24.76% on average, signalling that the company is in a high-growth phase with expenses shooting ahead of revenues, leading to annual losses. Eyeballing growth from a sector-level, the Australian mortgage industry has been growing its average earnings by double-digit 20.87% in the prior year, . This is a turnaround from a volatile drop of -4.42% in the previous few years. This means whatever tailwind the industry is benefiting from, N1 Holdings has not been able to leverage it as much as its industry peers.

What does this mean?

Though N1 Holdings’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 predict what will occur going forward, and when. The most useful step is to assess company-specific issues N1 Holdings may be facing and whether management guidance has dependably been met in the past. You should continue to research N1 Holdings to get a better picture of the stock by looking at:

  • 1. Financial Health: Is N1H’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.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.