Assessing Evolving Systems Inc’s (NASDAQ:EVOL) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess EVOL’s latest performance announced on 31 March 2018 and evaluate these figures to its historical trend and industry movements. View our latest analysis for Evolving Systems
Was EVOL weak performance lately part of a long-term decline?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, 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 in a uniform manner using the latest information. For Evolving Systems, its latest earnings (trailing twelve month) is US$2.03M, which, in comparison to last year’s level, has taken a dive by a substantial -49.08%. Since these figures are fairly myopic, I’ve determined an annualized five-year value for Evolving Systems’s earnings, which stands at US$3.35M This doesn’t seem to paint a better picture, since earnings seem to have consistently been deteriorating over the longer term.Why could this be happening? Well, let’s look at what’s transpiring with margins and whether the rest of the industry is facing the same headwind. In the past couple of years, revenue growth has failed to keep up which suggests that Evolving Systems’s bottom line has been propelled by unsustainable cost-reductions. Viewing growth from a sector-level, the US software industry has been growing its average earnings by double-digit 12.76% in the prior twelve months, and 12.89% over the past half a decade. This suggests that any tailwind the industry is profiting from, Evolving Systems has not been able to realize the gains unlike its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that endure a drawn out period of decline in earnings are going through some sort of reinvestment phase in order to keep up with the latest industry disruption and expansion. I recommend you continue to research Evolving Systems to get a better picture of the stock by looking at:
- Financial Health: Is EVOL’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.
- Valuation: What is EVOL 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 EVOL is currently mispriced by the market.
- 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.