Model N Inc (NYSE:MODN): Has Recent Earnings Growth Beaten Long-Term Trend?

Measuring Model N Inc’s (NYSE:MODN) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess MODN’s recent performance announced on 31 March 2018 and compare these figures to its historical trend and industry movements. View out our latest analysis for Model N

Did MODN beat its long-term earnings growth trend and its industry?

MODN is loss-making, with the most recent trailing twelve-month earnings of -US$28.61m (from 31 March 2018), which compared to last year has become less negative. However, the company’s loss seem to be contracting over the medium term, with the five-year earnings average of -US$19.71m. Each year, for the past five years MODN has seen an annual increase in operating expense growth, outpacing revenue growth of 8.70%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Inspecting growth from a sector-level, the US software industry has been growing its average earnings by double-digit 13.27% over the previous year, and 12.92% over the past five years. This suggests that, despite the fact that Model N is presently running a loss, it may have gained from industry tailwinds, moving earnings into a more favorable position.
NYSE:MODN Income Statement June 14th 18
NYSE:MODN Income Statement June 14th 18

Since Model N is loss-making, with operating expenses (opex) growing year-on-year at 16.27%, it may need to raise more cash over the next year. It currently has US$55.23m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached US$103.06m in the latest twelve months. Although this is a relatively simplistic calculation, and Model N may reduce its costs or open a new line of credit instead of issuing new equity shares, 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?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to forecast what will happen in the future and when. The most useful step is to examine company-specific issues Model N may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Model N to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for MODN’s future growth? Take a look at our free research report of analyst consensus for MODN’s outlook.
  2. Financial Health: Is MODN’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.
  3. 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.