In this commentary, I will examine Jatenergy Limited’s (ASX:JAT) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the retail distributors industry performed. As an investor, I find it beneficial to assess JAT’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. Check out our latest analysis for Jatenergy
How JAT fared against its long-term earnings performance and its industry
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, 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 various companies on a more comparable basis, using the most relevant data points. For Jatenergy, its latest earnings (trailing twelve month) is -AU$410.52K, which, in comparison to the previous year’s figure, has become less negative. Since these values are somewhat myopic, I’ve determined an annualized five-year value for Jatenergy’s earnings, which stands at -AU$2.28M. This shows that, while net income is negative, it has become less negative over the years.We can further evaluate Jatenergy’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Jatenergy’s top-line has grown by 60.09% on average, indicating that the company is in a high-growth phase with expenses racing ahead revenues, leading to annual losses. Inspecting growth from a sector-level, the Australian retail distributors industry has been growing its average earnings by double-digit 38.63% over the prior year, and a more subdued 6.55% over the last five years. This means any uplift the industry is profiting from, Jatenergy has not been able to gain as much as its industry peers.
What does this mean?
Jatenergy’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to envisage what will happen in the future and when. The most insightful step is to assess company-specific issues Jatenergy may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Jatenergy to get a better picture of the stock by looking at:
- Financial Health: Is JAT’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.
- Valuation: What is JAT 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 JAT is currently mispriced by the market.
- 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.