When Rision Limited’s (ASX:RNL) announced its latest earnings (31 December 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Rision’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not RNL actually performed well. Below is a quick commentary on how I see RNL has performed. Check out our latest analysis for Rision
Could RNL beat the long-term trend and outperform its industry?
For the purpose of this commentary, I like to use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This allows me to assess various companies in a uniform manner using new information. For Rision, its most recent earnings (trailing twelve month) is -AU$2.31M, which compared to the prior year’s level, has become less negative. Since these values may be relatively nearsighted, I have created an annualized five-year value for Rision’s net income, which stands at -AU$2.98M. This means despite the fact that net income is negative, it has become less negative over the years.We can further evaluate Rision’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Rision has seen an annual decline in revenue of -5.60%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the Australian internet industry has been growing its average earnings by double-digit 15.92% in the previous year, and 10.24% over the past half a decade. This suggests that, even though Rision is presently running a loss, it may have gained from industry tailwinds, moving earnings towards to right direction.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to envisage what will happen in the future and when. The most insightful step is to assess company-specific issues Rision may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Rision to get a more holistic view of the stock by looking at:
- 1. Financial Health: Is RNL’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.