After reading Infinera Corporation’s (NASDAQ:INFN) most recent earnings announcement (31 March 2018), I found it useful to look back at how the company has performed in the past 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 a crucial aspect. Below is a brief commentary on my key takeaways. View our latest analysis for Infinera
Was INFN’s recent earnings decline worse than the long-term trend and the industry?
I use the ‘latest twelve-month’ data, 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 examine different companies on a similar basis, using new information. For Infinera, its most recent trailing-twelve-month earnings is -US$180.33M, which, in comparison to the previous year’s figure, has become more negative. Given that these values are somewhat short-term, I’ve calculated an annualized five-year value for INFN’s net income, which stands at -US$44.14M. This doesn’t seem to paint a better picture, as earnings seem to have gradually been getting more and more negative over time.We can further evaluate Infinera’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Infinera’s top-line has increased by 12.15% on average, implying that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Eyeballing growth from a sector-level, the US communications industry has been growing its average earnings by double-digit 12.49% in the previous year, and a less exciting 6.64% over the past five years. This means any uplift the industry is enjoying, Infinera has not been able to leverage it as much as its average peer.
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 envisage what will occur going forward, and when. The most useful step is to assess company-specific issues Infinera may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Infinera to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for INFN’s future growth? Take a look at our free research report of analyst consensus for INFN’s outlook.
- Financial Health: Is INFN’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.