For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at kneatcom inc’s (CVE:KSI) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. Check out our latest analysis for kneat.com
Did KSI’s recent earnings growth beat the long-term trend and the industry?KSI is loss-making, with the most recent trailing twelve-month earnings of -CA$3.71m (from 31 March 2018), 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 -CA$4.74m. Each year, for the past five years KSI has seen an annual increase in operating expense growth, outpacing revenue growth of 11.57%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Scanning growth from a sector-level, the Canadian healthcare services industry has been growing its average earnings by double-digit 19.83% over the past twelve months, and 20.99% over the previous five years. This means that, while kneat.com is currently unprofitable, it may have benefited from industry tailwinds, moving earnings in the right direction.
Given that kneat.com is not profitable, even if operating expenses (SG&A and one-year R&D) continues to fall at previous year’s rate of -18.19%, the company’s current cash level (CA$2.06m) will still be insufficient to cover its expenses in the upcoming year. This is not a great sign in terms of operations and cash management. Even though this is analysis is fairly basic, and kneat.com still can cut its overhead further, or open a new line of credit instead of issuing new equity shares, the outcome of this analysis still helps us understand how sustainable the kneat.com’s operation is, and when things may have to change.
What does this mean?
Though kneat.com’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most insightful step is to assess company-specific issues kneat.com may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research kneat.com to get a better picture of the stock by looking at:
- Financial Health: Is KSI’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.