INSCAPE Corporation’s (TSE:INQ) Earnings Dropped -103.99%, Did Its Industry Show Weakness Too?

After looking at INSCAPE Corporation’s (TSX:INQ) latest earnings update (31 January 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. 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 an important aspect. In this article I briefly touch on my key findings. See our latest analysis for INSCAPE

Commentary On INQ’s Past Performance

To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, 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 method allows me to assess different stocks on a more comparable basis, using the latest information. For INSCAPE, its most recent trailing-twelve-month earnings is -CA$291.00K, which compared to the prior year’s level, has turned from positive to negative. Given that these figures are fairly myopic, I have calculated an annualized five-year figure for INSCAPE’s earnings, which stands at -CA$3.32M. This means despite the fact that net income is negative, it has become less negative over the years.

TSX:INQ Income Statement May 2nd 18
TSX:INQ Income Statement May 2nd 18
We can further analyze INSCAPE’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years INSCAPE’s top-line has increased by a mere 2.51%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Inspecting growth from a sector-level, the Canadian commercial services industry has been growing its average earnings by double-digit 32.66% in the previous year, and 30.33% over the past five years. This shows that whatever tailwind the industry is enjoying, INSCAPE has not been able to realize the gains unlike its average peer.

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 occur going forward, and when. The most valuable step is to assess company-specific issues INSCAPE may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research INSCAPE to get a more holistic view of the stock by looking at:

  1. Financial Health: Is INQ’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 INQ 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 INQ 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 January 2018. This may not be consistent with full year annual report figures.