After reading Hövding Sverige AB (publ)’s (STO:HOVD) most recent earnings announcement (31 March 2018), 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. View out our latest analysis for Hövding Sverige
Did HOVD’s recent performance beat its trend and industry?HOVD is loss-making, with the most recent trailing twelve-month earnings of -kr41.51m (from 31 March 2018), which compared to last year has become less negative. Furthermore, the company’s loss seem to be growing over time, with the five-year earnings average of -kr35.55m. Each year, for the past five years HOVD has seen an annual increase in operating expense growth, outpacing revenue growth of 28.08%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Inspecting growth from a sector-level, the SE leisure industry has been relatively flat in terms of earnings growth in the past twelve months, evening out from a notable 14.93% over the past five years. Since the Leisure sector in SE is relatively small, I’ve included similar companies in the wider region in order to get a better idea of the growth, which is a median of profitable companies of companies such as KABE AB (publ.), Thule Group and MIPS. This shows that though Hövding Sverige is presently loss-making, whatever near-term headwind the industry is facing, Hövding Sverige is less exposed compared to its peers.
Given that Hövding Sverige is currently unprofitable, with operating expenses (opex) growing year-on-year at 15.38%, it may need to raise more cash over the next year. It currently has kr12.72m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached kr54.02m in the latest twelve months. Even though this is analysis is fairly basic, and Hövding Sverige still can cut its overhead in the near future, or open a new line of credit instead of issuing new equity shares, the 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. Companies that incur net loss is always difficult to envisage what will happen in the future and when. The most useful step is to assess company-specific issues Hövding Sverige may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Hövding Sverige to get a better picture of the stock by looking at:
- Financial Health: Is HOVD’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.