Should Telefónica Deutschland Holding AG’s (FRA:O2D) Recent Earnings Worry You?

Assessing Telefónica Deutschland Holding AG’s (FRA:O2D) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess O2D’s latest performance announced on 30 September 2018 and evaluate these figures to its historical trend and industry movements.

Check out our latest analysis for Telefónica Deutschland Holding

Did O2D’s recent performance beat its trend and industry?

O2D is loss-making, with the most recent trailing twelve-month earnings of -€326.0m (from 30 September 2018), which compared to last year has become less negative. Furthermore, the company’s loss seem to be growing over time, with the five-year earnings average of -€180.6m. Each year, for the past five years O2D has seen an annual increase in operating expense growth, outpacing revenue growth of 8.7%, on average. This adverse movement is a driver of the company’s inability to reach breakeven.

Scanning growth from a sector-level, the DE telecom industry has been growing its average earnings by double-digit 18% in the previous twelve months,

DB:O2D Income Statement Export November 26th 18
DB:O2D Income Statement Export November 26th 18

Although Telefónica Deutschland Holding is loss-making, it has an ample cash cushion (€941m) to pay for its upcoming operating expenses over the next couple of years. This is a strong indication of good cash management.

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 difficult to forecast what will happen in the future and when. The most insightful step is to examine company-specific issues Telefónica Deutschland Holding may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Telefónica Deutschland Holding to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for O2D’s future growth? Take a look at our free research report of analyst consensus for O2D’s outlook.
  2. Financial Health: Are O2D’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.
  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 30 September 2018. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.