For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at ApplyDirect Limited’s (ASX:AD1) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. View out our latest analysis for ApplyDirect
Was AD1 weak performance lately part of a long-term decline?AD1 is loss-making, with the most recent trailing twelve-month earnings of -AU$5.15m (from 31 December 2017), which compared to last year has become more negative. Furthermore, the company’s loss seem to be growing over time, with the five-year earnings average of -AU$3.68m. Each year, for the past five years AD1 has seen an annual increase in operating expense growth, outpacing revenue growth of 15.47%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Scanning growth from a sector-level, the Australian internet industry has been growing its average earnings by double-digit 23.29% over the prior year, and 20.81% over the past five. This means that whatever uplift the industry is deriving benefit from, ApplyDirect has not been able to reap as much as its industry peers.
Even though ApplyDirect is currently unprofitable, its has a good cash runway to meet its upcoming operating expense (should SG&A and one-year R&D remain constant at the current level of AU$2.72m) over the next year. This is a strong indication of good cash management.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to predict what will occur going forward, and when. The most useful step is to examine company-specific issues ApplyDirect may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research ApplyDirect to get a better picture of the stock by looking at:
- Financial Health: Is AD1’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.