For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Sportech PLC (LSE:SPO) useful as an attempt to give more color around how Sportech is currently performing. See our latest analysis for Sportech
How Well Did SPO Perform?
I prefer to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to analyze different companies on a more comparable basis, using new information. For Sportech, its latest trailing-twelve-month earnings is -UK£22.78M, which, relative to last year’s level, has turned from positive to negative. Since these figures are somewhat short-term, I have determined an annualized five-year value for Sportech’s earnings, which stands at UK£2.29M.We can further assess Sportech’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Sportech has seen an annual decline in revenue of -6.07%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Looking at growth from a sector-level, the UK hospitality industry has been growing, albeit, at a muted single-digit rate of 3.07% over the prior year, and a substantial 11.13% over the last five years. This means that whatever near-term headwind the industry is facing, it’s hitting Sportech harder than its peers.
What does this mean?
Sportech’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to predict what will occur going forward, and when. The most useful step is to assess company-specific issues Sportech may be facing and whether management guidance has consistently been met in the past. You should continue to research Sportech to get a more holistic view of the stock by looking at:
- Financial Health: Is SPO’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.