With 82.5% Earnings Growth Lately, Did Jatenergy Limited (ASX:JAT) Outperform The Industry?

After looking at Jatenergy Limited’s (ASX:JAT) latest earnings announcement (30 June 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Jatenergy’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. View our latest analysis for Jatenergy

Were JAT’s earnings stronger than its past performances and the industry?

I look at the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This allows me to examine many different companies in a uniform manner using the most relevant data points. For Jatenergy, the latest earnings -A$0M, which compared to the prior year’s level, has become less negative. Given that these figures are relatively myopic, I have calculated an annualized five-year value for JAT’s net income, which stands at -A$3M. This means though net income is negative, it has become less negative over the years.

ASX:JAT Income Statement Dec 1st 17
ASX:JAT Income Statement Dec 1st 17
We can further assess Jatenergy’s loss by researching what has been happening in the industry as well as within the company. First, I want to briefly look into the line items. Revenue growth over past few years has increased by 62.38%, signalling that Jatenergy is in a high-growth phase with expenses shooting ahead of elevated top-line growth rates. Scanning growth from a sector-level, the Australian distributors industry has been growing its average earnings by double-digit 11.87% over the previous twelve months, and a more muted 8.21% over the past five years. This means that, even though Jatenergy is presently unprofitable, it may have benefited from industry tailwinds, moving earnings in the right direction.

What does this mean?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to envisage what will occur going forward, 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 recommend you continue to research Jatenergy to get a better picture of the stock by looking at:

1. 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.

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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.