Where Vonex Limited (ASX:VN8) Stands In Earnings Growth Against Its Industry

After looking at Vonex Limited’s (ASX:VN8) latest earnings announcement (31 December 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. View our latest analysis for Vonex

Commentary On VN8’s Past Performance

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 blend allows me to assess different companies on a similar basis, using the most relevant data points. For Vonex, its most recent earnings (trailing twelve month) is -AU$3.54M, which, against last year’s level, has become less negative. Given that these figures may be fairly nearsighted, I have estimated an annualized five-year figure for VN8’s earnings, which stands at -AU$8.64M. This means that, although net income is negative, it has become less negative over the years.

ASX:VN8 Income Statement May 8th 18
ASX:VN8 Income Statement May 8th 18
We can further assess Vonex’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Vonex’s top-line has grown by 23.71% on average, implying that the company is in a high-growth phase with expenses racing ahead revenues, leading to annual losses. Scanning growth from a sector-level, the Australian telecom industry has been growing, albeit, at a unexciting single-digit rate of 5.64% over the previous twelve months, and a substantial 14.78% over the last five years. This suggests that, even though Vonex is currently running a loss, it may have been aided by industry tailwinds, moving earnings in the right direction.

What does this mean?

Though Vonex’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 envisage what will happen in the future and when. The most insightful step is to assess company-specific issues Vonex may be facing and whether management guidance has consistently been met in the past. You should continue to research Vonex to get a more holistic view of the stock by looking at:

  1. Financial Health: Is VN8’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. Valuation: What is VN8 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether VN8 is currently mispriced by the market.
  3. 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 December 2017. This may not be consistent with full year annual report figures.