For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine National American University Holdings Inc’s (NASDAQ:NAUH) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers. View out our latest analysis for National American University Holdings
Despite a decline, did NAUH underperform the long-term trend and the industry?
NAUH is loss-making, with the most recent trailing twelve-month earnings of -US$12.24m (from 28 February 2018), which compared to last year has become more negative. Over the past five years, its average earnings level was positive at US$1.15m, which meant its expenses has only exceeded revenues recently, pulling NAUH into the loss-making zone.
Each year, for the past five years NAUH has seen an annual decline in revenue of -6.02%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Viewing growth from a sector-level, the US consumer services industry has been growing its average earnings by double-digit 19.41% in the prior twelve months, and 13.14% over the past five. This means that any uplift the industry is benefiting from, National American University Holdings has not been able to gain as much as its industry peers.
Given that National American University Holdings is not profitable, even if operating expenses (SG&A and one-year R&D) continues to fall at previous year’s rate of -8.18%, the company’s current cash level (US$4.64m) will still be insufficient to cover its expenses in the upcoming year. This is not a great sign in terms of operations and cash management. Although this is a relatively simplistic calculation, and National American University Holdings may continue to reduce its costs further or raise debt capital instead of coming to equity markets, 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?
National American University Holdings’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 difficult to forecast what will happen in the future and when. The most insightful step is to assess company-specific issues National American University Holdings may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research National American University Holdings to get a more holistic view of the stock by looking at:
- Financial Health: Is NAUH’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.