Does Image Sensing Systems Inc's (NASDAQ:ISNS) Past Performance Indicate A Weaker Future?

When Image Sensing Systems Inc (NASDAQ:ISNS) announced its most recent earnings (30 September 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Image Sensing Systems performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see ISNS has performed. Check out our latest analysis for Image Sensing Systems

How Well Did ISNS Perform?

I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This technique enables me to assess different stocks in a uniform manner using the latest information. For Image Sensing Systems, its latest earnings (trailing twelve month) is $0.7M, which compared to the prior year's level, has declined by -26.96%. Since these values may be fairly myopic, I have calculated an annualized five-year figure for ISNS's net income, which stands at -$4.0M. This shows that while earnings growth was negative from the prior year, in the long run, Image Sensing Systems's earnings have been increasing on average.

How has it been able to do this? Let's take a look at if it is merely a result of an industry uplift, or if Image Sensing Systems has seen some company-specific growth. Over the past couple of years, Image Sensing Systems grew bottom-line, while its top-line fell, by effectively managing its costs. This has led to to a margin expansion and profitability over time. Looking at growth from a sector-level, the US electronic industry has been growing its average earnings by double-digit 22.40% in the previous twelve months, and 10.68% over the previous five years. This means that any uplift the industry is deriving benefit from, Image Sensing Systems has not been able to realize the gains unlike its average peer.

What does this mean?

Though Image Sensing Systems's past data is helpful, it is only one aspect of my investment thesis. Companies are profitable, but have unpredictable earnings, can have many factors influencing its business. I recommend you continue to research Image Sensing Systems to get a better picture of the stock by looking at:

1. Financial Health: Is ISNS’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. Valuation: What is ISNS 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 ISNS is currently mispriced by the market.

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 30 September 2017. This may not be consistent with full year annual report figures.

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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.