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 Linius Technologies Limited (ASX:LNU) useful as an attempt to give more color around how Linius Technologies is currently performing. Check out our latest analysis for Linius Technologies
Could LNU beat the long-term trend and outperform its industry?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, 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 blend allows me to examine many different companies on a similar basis, using the latest information. For Linius Technologies, its most recent earnings (trailing twelve month) is -AU$6.70M, which, against the previous year’s level, has become less negative. Since these figures are somewhat nearsighted, I’ve created an annualized five-year figure for LNU’s net income, which stands at -AU$5.19M. This means that, Linius Technologies has historically performed better than recently, although it seems like earnings are now heading back towards a more favorable position once more.We can further evaluate Linius Technologies’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Linius Technologies’s top-line has risen by 72.86% on average, implying that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Eyeballing growth from a sector-level, the Australian software industry has been growing its average earnings by double-digit 14.06% in the past year, and 13.98% over the previous five years. This means that, while Linius Technologies is presently loss-making, it may have benefited from industry tailwinds, moving earnings towards to right direction.
What does this mean?
Though Linius Technologies’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to predict what will happen in the future and when. The most insightful step is to examine company-specific issues Linius Technologies may be facing and whether management guidance has steadily been met in the past. You should continue to research Linius Technologies to get a more holistic view of the stock by looking at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.
- 1. Future Outlook: What are well-informed industry analysts predicting for LNU’s future growth? Take a look at this free research report of analyst consensus for LNU’s outlook.
- 2. Financial Health: Is LNU’s operations financially sustainable? Balance sheets can be hard to analyze, which is why Simply Wall St does it for you. Check out important financial health checks here.
- 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore a free list of these great stocks here.