Investors with a long-term horizong may find it valuable to assess Blue Prism Group plc’s (LON:PRSM) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Blue Prism Group is currently performing. Check out our latest analysis for Blue Prism Group
Despite a decline, did PRSM underperform the long-term trend and the industry?PRSM is loss-making, with the most recent trailing twelve-month earnings of -UK£9.87m (from 31 October 2017), 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£4.14m. Each year, for the past five years PRSM has seen an annual increase in operating expense growth, outpacing revenue growth of 44.85%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Eyeballing growth from a sector-level, the UK software industry has been growing its average earnings by double-digit 16.61% over the previous twelve months, and 15.27% over the previous five years. This shows that whatever uplift the industry is deriving benefit from, Blue Prism Group has not been able to leverage it as much as its average peer.
Given that Blue Prism Group is loss-making, with operating expenses (opex) growing year-on-year at 25.00%, it may need to raise more cash over the next year. It currently has UK£16.33m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached UK£33.99m in the latest twelve months. Even though this is analysis is fairly basic, and Blue Prism Group still can cut its overhead in the near future, or raise debt capital instead of coming to equity markets, the analysis still helps us understand how sustainable the Blue Prism Group’s operation is, and when things may have to change.
What does this mean?
Though Blue Prism Group’s past data is helpful, it is only one aspect of my investment thesis. 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 assess company-specific issues Blue Prism Group may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Blue Prism Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PRSM’s future growth? Take a look at our free research report of analyst consensus for PRSM’s outlook.
- Financial Health: Is PRSM’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.