Assessing Facebook Inc’s (NASDAQ:FB) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Facebook is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its internet industry peers. Check out our latest analysis for Facebook
How FB fared against its long-term earnings performance and its industry
I look at 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 blend enables me to assess different stocks in a uniform manner using the latest information. For Facebook, its most recent bottom-line (trailing twelve month) is US$17.85B, which, against the previous year’s figure, has climbed up by a substantial 55.00%. Given that these values are fairly short-term thinking, I’ve computed an annualized five-year value for Facebook’s net income, which stands at US$5.02B This suggests that, on average, Facebook has been able to increasingly grow its net income over the last few years as well.What’s enabled this growth? Let’s see if it is merely attributable to industry tailwinds, or if Facebook has experienced some company-specific growth. Over the past couple of years, Facebook expanded its bottom line faster than revenue by efficiently controlling its costs. This brought about a margin expansion and profitability over time. Eyeballing growth from a sector-level, the US internet industry has been growing its average earnings by double-digit 16.91% in the previous twelve months, and 18.02% over the previous five years. This suggests that whatever uplift the industry is enjoying, Facebook is capable of amplifying this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Facebook gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Facebook to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FB’s future growth? Take a look at our free research report of analyst consensus for FB’s outlook.
- Financial Health: Is FB’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.