Did Nvoi Limited's (ASX:NVO) Earnings Growth Outperform The Industry?

In this commentary, I will examine Nvoi Limited's (ASX:NVO) latest earnings update (30 June 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the internet software and services industry performed. As an investor, I find it beneficial to assess NVO’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 Nvoi

Were NVO's earnings stronger than its past performances and the industry?

I like to use 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 technique allows me to assess many different companies on a similar basis, using the latest information. For Nvoi, its latest trailing-twelve-month earnings is -A$4.3M, which compared to the prior year's level, has become less negative. Given that these figures are relatively short-term, I’ve calculated an annualized five-year value for NVO's earnings, which stands at -A$4.2M. This shows that, Nvoi has historically performed better than recently, though it seems like earnings are now heading back towards to right direction again.

We can further analyze Nvoi's loss by researching what’s going on in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last couple of years has more than doubled, signalling that Nvoi is in a high-growth period with expenses shooting ahead of high top-line growth rates, leading to yearly losses. Scanning growth from a sector-level, the Australian internet software and services industry has been relatively flat in terms of earnings growth over the last few years. This means that while Nvoi is presently unprofitable, whatever recent headwind the industry is experiencing, Nvoi is less exposed compared to its peers.

What does this mean?

Though Nvoi'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 useful step is to assess company-specific issues Nvoi may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Nvoi to get a better picture of the stock by looking at:

1. Financial Health: Is NVO’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 trailing twelve months from 30 June 2017. This may not be consistent with full year annual report figures.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.