Does Flexiroam Limited's (ASX:FRX) -12.70% Earnings Drop Reflect A Longer Term Trend?

Today I will take a look at Flexiroam Limited's (ASX:FRX) most recent earnings update (31 March 2018) and compare these latest figures against its performance over the past few years, as well as how the rest of the telecom industry performed. As an investor, I find it beneficial to assess FRX’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 Flexiroam

Was FRX's weak performance lately a part of a long-term decline?

FRX is loss-making, with the most recent trailing twelve-month earnings of -AU$5.79m (from 31 March 2018), which compared to last year has become more negative. Furthermore, the company's loss seem to be growing over time, with the five-year earnings average of -AU$3.81m. Each year, for the past five years FRX has seen an annual increase in operating expense growth, outpacing revenue growth of 11.75%, on average. This adverse movement is a driver of the company's inability to reach breakeven. Inspecting growth from a sector-level, the Australian telecom industry has been

Since Flexiroam is loss-making, with operating expenses (opex) growing year-on-year at 2.72%, it may need to raise more cash over the next year. It currently has AU$792.45k in cash and short-term investments, however, opex (SG&A and one-year R&D) reached AU$4.40m in the latest twelve months. Even though this is analysis is fairly basic, and Flexiroam still can cut its overhead in the near future, or open a new line of credit instead of issuing new equity shares, the outcome of this 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?

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 examine company-specific issues Flexiroam may be facing and whether management guidance has steadily been met in the past. You should continue to research Flexiroam to get a more holistic view of the stock by looking at:

1. Financial Health: Is FRX’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 31 March 2018. 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.