After looking at Synertone Communication Corporation’s (SEHK:1613) latest earnings update (30 September 2017), I found it helpful to revisit the company’s performance in the past couple of years 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 an important aspect. In this article I briefly touch on my key findings. View our latest analysis for Synertone Communication
Did 1613 beat its long-term earnings growth trend and its industry?
For the most up-to-date info, I use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method enables me to assess different stocks on a similar basis, using the latest information. For Synertone Communication, its latest earnings (trailing twelve month) is -HK$199.30M, which, in comparison to the previous year’s level, has become less negative. Since these figures may be fairly short-term, I have calculated an annualized five-year value for 1613’s earnings, which stands at -HK$84.74M. This shows that, Synertone Communication has historically performed better than recently, while it seems like earnings are now heading back towards a more favorable position once more.We can further assess Synertone Communication’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Synertone Communication has seen an annual decline in revenue of -6.60%, 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 HK communications industry has been growing its average earnings by double-digit 10.55% over the past year, and a flatter -0.58% over the past half a decade. This suggests that, despite the fact that Synertone Communication is currently loss-making, it may have only just gained from the recent industry expansion, moving earnings into a more favorable position.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to forecast what will occur going forward, and when. The most insightful step is to assess company-specific issues Synertone Communication may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Synertone Communication to get a better picture of the stock by looking at:
- 1. Financial Health: Is 1613’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.
- 2. Valuation: What is 1613 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 1613 is currently mispriced by the market.
- 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.