How Allied Minds plc's (LON:ALM) EPS Dropped -7.5%, Did Its Industry Show Weakness Too?

After reading Allied Minds plc's (LSE:ALM) most recent earnings announcement (30 June 2017), I found it useful to look back at how the company has performed in the past 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 a crucial aspect. Below is a brief commentary on my key takeaways. Check out our latest analysis for Allied Minds

Did ALM perform worse than its track record and industry?

I look at 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 enables me to examine many different companies in a uniform manner using new information. For Allied Minds, the latest earnings -$99.8M, which, against last year’s level, has become more negative. Given that these figures may be somewhat short-term thinking, I’ve calculated an annualized five-year value for ALM's net income, which stands at -$62.2M. This doesn't look much better, since earnings seem to have steadily been getting more and more negative over time.

Additionally, we can evaluate Allied Minds's loss by looking at what has been happening in the industry along with within the company. First, I want to quickly look into the line items. Revenue growth over past few years has risen by a mere 5.06%. Given that top-line growth is also pretty stale the key to profitability going forward would be controlling costs. Eyeballing growth from a sector-level, the UK capital markets industry has been growing its average earnings by double-digit 21.16% in the past year, and 12.57% over the past five years. This shows that any uplift the industry is deriving benefit from, Allied Minds has not been able to leverage it as much as its industry peers.

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 Allied Minds may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Allied Minds to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for ALM’s future growth? Take a look at our free research report of analyst consensus for ALM’s outlook.

2. Financial Health: Is ALM’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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.