After reading CropLogic Limited’s (ASX:CLI) latest earnings update (30 September 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether CLI has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. View our latest analysis for CropLogic
Was CLI’s recent earnings decline worse than the long-term trend and the industry?
I prefer to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method enables me to analyze various companies in a uniform manner using new information. For CropLogic, its latest trailing-twelve-month earnings is -AU$1.37M, which, against the prior year’s level, has become more negative. Given that these figures are relatively short-term thinking, I’ve estimated an annualized five-year value for CLI’s net income, which stands at -AU$1.19M. This doesn’t look much better, since earnings seem to have consistently been getting more and more negative over time.We can further analyze CropLogic’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years CropLogic’s top-line has risen by 87.69% on average, indicating that the company is in a high-growth phase with expenses racing ahead revenues, leading to annual losses. Viewing growth from a sector-level, the Australian professional services industry has been enduring some headwinds over the prior year, leading to an average earnings drop of -4.71%. This is a momentous change, given that the industry has been delivering a positive rate of 3.29%, on average, over the past half a decade. This suggests that any near-term headwind the industry is experiencing, it’s hitting CropLogic harder 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 hard to envisage what will occur going forward, and when. The most useful step is to assess company-specific issues CropLogic may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research CropLogic to get a more holistic view of the stock by looking at:
- Financial Health: Is CLI’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.