Understanding Bango plc’s (LON:BGO) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Bango is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period.
See our latest analysis for Bango
Did BGO perform worse than its track record and industry?
BGO is loss-making, with the most recent trailing twelve-month earnings of -UK£4m (from 30 June 2018), which compared to last year has become more negative. However, the company’s loss seem to be contracting over the medium term, with the five-year earnings average of -UK£4m. Each year, for the past five years BGO has seen an annual decline in revenue of -22%, on average. This adverse movement is a driver of the company’s inability to reach breakeven.
Inspecting growth from a sector-level, the UK software industry has been growing its average earnings by double-digit 13% over the past twelve months, and 21% over the past half a decade. This growth is a median of profitable companies of 25 Software companies in GB including Netcall, IMImobile and Crimson Tide. This suggests that any tailwind the industry is benefiting from, Bango has not been able to reap as much as its industry peers.
Given that Bango is loss-making, with operating expenses (opex) growing year-on-year at 4.0%, it may need to raise more cash over the next year. It currently has UK£6m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached UK£7m in the latest twelve months. Although this is a relatively simplistic calculation, and Bango may reduce its costs or raise debt capital instead of coming to equity markets, the outcome of this analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
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 envisage what will occur going forward, and when. The most valuable step is to assess company-specific issues Bango may be facing and whether management guidance has steadily been met in the past. You should continue to research Bango to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BGO’s future growth? Take a look at our free research report of analyst consensus for BGO’s outlook.
- Financial Health: Are BGO’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.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 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.