For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Nvoi Limited (ASX:NVO) useful as an attempt to give more color around how Nvoi is currently performing. See our latest analysis for Nvoi
Commentary On NVO’s Past Performance
For the purpose of this commentary, I like to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This enables me to assess different companies on a similar basis, using the most relevant data points. For Nvoi, its most recent bottom-line (trailing twelve month) is -AU$4.10M, which compared to the prior year’s level, has become less negative. Given that these values may be relatively nearsighted, I have calculated an annualized five-year value for Nvoi’s net income, which stands at -AU$4.19M. This means despite the fact that net income is negative, it has become less negative over the years.We can further analyze Nvoi’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Nvoi’s top-line more than doubled on average, indicating that the business is in a high-growth phase with expenses shooting ahead of revenues, leading to annual losses. Eyeballing growth from a sector-level, the Australian internet industry has been growing its average earnings by double-digit 35.31% over the prior year, and 27.02% over the last five years. This shows that any uplift the industry is profiting from, Nvoi has not been able to realize the gains unlike its industry peers.
What does this mean?
Though Nvoi’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 forecast what will occur going forward, and when. The most insightful step is to examine 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 more holistic view of the stock by looking at:
- 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.
- 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.