Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Chant West Holdings Limited’s (ASX:CWL) 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. Check out our latest analysis for Chant West Holdings
Was CWL’s recent earnings decline worse than the long-term trend and the industry?
For the purpose of this commentary, I like to use 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 method allows me to assess various companies in a uniform manner using the latest information. For Chant West Holdings, its latest earnings (trailing twelve month) is -AU$2.17M, which, relative to the previous year’s figure, has become more negative. Since these values are somewhat short-term thinking, I’ve calculated an annualized five-year value for CWL’s earnings, which stands at -AU$2.96M. This suggests that, despite the fact that net income is negative, it has become less negative over the years.We can further examine Chant West Holdings’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Chant West Holdings’s top-line has grown by 39.98% on average, implying that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Scanning growth from a sector-level, the Australian software industry has been growing its average earnings by double-digit 13.49% over the past year, and 13.98% over the previous five years. This suggests that any tailwind the industry is deriving benefit from, Chant West Holdings has not been able to leverage it as much as its industry peers.
What does this mean?
Though Chant West Holdings’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most valuable step is to assess company-specific issues Chant West Holdings may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Chant West Holdings to get a more holistic view of the stock by looking at:
- 1. Financial Health: Is CWL’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.