For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Qantm Intellectual Property Limited (ASX:QIP) useful as an attempt to give more color around how Qantm Intellectual Property is currently performing. View our latest analysis for Qantm Intellectual Property
Was QIP’s recent earnings decline indicative of a tough track record?
I look at the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This enables me to analyze different stocks on a similar basis, using new information. For Qantm Intellectual Property, its latest earnings (trailing twelve month) is AU$10.92M, which, against last year’s level, has dropped by -18.00%. Since these values may be fairly myopic, I have created an annualized five-year figure for Qantm Intellectual Property’s net income, which stands at AU$12.99M This doesn’t seem to paint a better picture, as earnings seem to have steadily been diminishing over the longer term.What could be happening here? Let’s examine what’s going on with margins and whether the whole industry is feeling the heat. Revenue growth in the last couple of years, has been positive, however earnings growth has been deteriorating. This means Qantm Intellectual Property has been ramping up expenses, which is harming margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the Australian professional services industry has been enduring some headwinds in the past year, leading to an average earnings drop of -4.71%. This is a significant change, given that the industry has been delivering a positive rate of 3.29%, on average, over the previous five years. This means any recent headwind the industry is enduring, it’s hitting Qantm Intellectual Property harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Typically companies that face a prolonged period of decline in earnings are undergoing some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a sign of a structural change, which makes Qantm Intellectual Property and its peers a higher risk investment. I recommend you continue to research Qantm Intellectual Property to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for QIP’s future growth? Take a look at our free research report of analyst consensus for QIP’s outlook.
- Financial Health: Is QIP’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.