Stock Analysis

Should You Be Concerned With Litho Formas SA.'s (ELI:LIT) -109.36% Earnings Drop?

ENXTLS:LIT
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In this commentary, I will examine Litho Formas SA.'s (ENXTLS:LIT) latest earnings update (31 December 2016) and compare these figures against its performance over the past couple of years, as well as how the rest of the commercial services industry performed. As an investor, I find it beneficial to assess LIT’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. Check out our latest analysis for Litho Formas

How Well Did LIT Perform?

To account for any quarterly or half-yearly updates, 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 technique enables me to examine different stocks on a similar basis, using the most relevant data points. For Litho Formas, its most recent bottom-line (trailing twelve month) is -€108.73K, which compared to the previous year's level, has turned from positive to negative. Since these figures may be somewhat short-term thinking, I’ve calculated an annualized five-year value for Litho Formas's earnings, which stands at -€94.37K. This doesn't look much better, as earnings seem to have consistently been getting more and more negative over time.

ENXTLS:LIT Income Statement Mar 20th 18
ENXTLS:LIT Income Statement Mar 20th 18
We can further analyze Litho Formas's loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Litho Formas has seen an annual decline in revenue of -16.59%, on average. This adverse movement is a driver of the company's inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the PT commercial services industry has been growing, albeit, at a subdued single-digit rate of 6.01% in the prior year, and 9.29% over the previous five years. This suggests that whatever uplift the industry is enjoying, Litho Formas has not been able to gain as much as its industry peers.

What does this mean?

Litho Formas's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that incur net loss is always hard to predict what will occur going forward, and when. The most useful step is to examine company-specific issues Litho Formas may be facing and whether management guidance has steadily been met in the past. You should continue to research Litho Formas to get a more holistic view of the stock by looking at:

  • 1. Financial Health: Is LIT’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 LIT 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 LIT 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.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2016. This may not be consistent with full year annual report figures.

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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.