In this article, I will take a look at Nuheara Limited’s (ASX:NUH) most recent earnings update (31 December 2017) and compare these latest figures against its performance over the past few years, along with how the rest of NUH’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. View out our latest analysis for Nuheara
How Did NUH’s Recent Performance Stack Up Against Its Past?
NUH is loss-making, with the most recent trailing twelve-month earnings of -AU$7.41m (from 31 December 2017), which compared to last year has become less negative. However, the company’s loss seem to be contracting over the medium term, with the five-year earnings average of -AU$5.85m. Each year, for the past five years NUH has seen an annual increase in operating expense growth, outpacing revenue growth of 112.89%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Scanning growth from a sector-level, the Australian tech industry has been growing its average earnings by double-digit 14.27% over the previous twelve months, and 10.60% over the previous five years. This suggests that any uplift the industry is benefiting from, Nuheara has not been able to realize the gains unlike its average peer.
Given that Nuheara is currently unprofitable, with operating expenses (opex) growing year-on-year at 25.00%, it may need to raise more cash over the next year. It currently has AU$5.64m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached AU$7.77m in the latest twelve months. Although this is a relatively simplistic calculation, and Nuheara may reduce its costs or raise debt capital instead of coming to equity markets, the analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
What does this mean?
Though Nuheara’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 Nuheara may be facing and whether management guidance has regularly been met in the past. You should continue to research Nuheara to get a more holistic view of the stock by looking at:
- Financial Health: Is NUH’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.