China Finance Online Co Limited (NASDAQ:JRJC): Does The -97.89% Earnings Drop Reflect A Longer Term Trend?

Examining China Finance Online Co Limited's (NASDAQ:JRJC) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess JRJC's latest performance announced on 31 March 2018 and compare these figures to its longer term trend and industry movements. View our latest analysis for China Finance Online

Was JRJC's recent earnings decline worse than the long-term trend and the industry?

I prefer 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 method allows me to assess different companies on a similar basis, using new information. For China Finance Online, its most recent bottom-line (trailing twelve month) is -US$30.29M, which compared to last year’s figure, has become more negative. Given that these values are relatively short-term thinking, I have computed an annualized five-year figure for JRJC's net income, which stands at -US$8.26M. This doesn't look much better, as earnings seem to have gradually been getting more and more negative over time.

We can further assess China Finance Online's loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years China Finance Online's top-line has risen by a mere 8.17%, on average. The company's inability to breakeven has been aided by the relatively flat top-line in the past. Inspecting growth from a sector-level, the US internet industry has been growing its average earnings by double-digit 26.70% over the past year, and 18.27% over the past five. This suggests that any uplift the industry is deriving benefit from, China Finance Online has not been able to leverage it as much as its average peer.

What does this mean?

Though China Finance Online'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 predict what will happen in the future and when. The most useful step is to examine company-specific issues China Finance Online may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research China Finance Online to get a more holistic view of the stock by looking at:

1. Financial Health: Is JRJC’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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.