Does 500com Limited’s (NYSE:WBAI) Past Performance Indicate A Weaker Future?

After looking at 500com Limited’s (NYSE:WBAI) latest earnings update (31 March 2018), 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. Check out our latest analysis for 500.com

Was WBAI weak performance lately part of a long-term decline?

I prefer to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend enables me to analyze different companies on a more comparable basis, using the latest information. For 500.com, its most recent bottom-line (trailing twelve month) is -CN¥321.40M, which, relative to the prior year’s level, has become more negative. Given that these figures are relatively nearsighted, I have calculated an annualized five-year figure for 500.com’s net income, which stands at -CN¥97.81M. This doesn’t look much better, since earnings seem to have gradually been getting more and more negative over time.

NYSE:WBAI Income Statement Jun 4th 18
NYSE:WBAI Income Statement Jun 4th 18
We can further assess 500.com’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade 500.com has seen an annual decline in revenue of -25.00%, 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 US hospitality industry has been growing its average earnings by double-digit 13.77% over the previous twelve months, and 12.24% over the last five years. This shows that whatever uplift the industry is deriving benefit from, 500.com has not been able to reap as much as its industry peers.

What does this mean?

Though 500.com’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 useful step is to examine company-specific issues 500.com may be facing and whether management guidance has dependably been met in the past. You should continue to research 500.com to get a more holistic view of the stock by looking at:

  1. Financial Health: Is WBAI’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. 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 March 2018. This may not be consistent with full year annual report figures.