Should SGOCO Group Ltd's (SGOC) Earnings Decline In Recent Times Worry You?

After looking at SGOCO Group Ltd's (NASDAQ:SGOC) latest earnings announcement (30 June 2017), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. 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. See our latest analysis for SGOC

Commentary On SGOC's Past Performance

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 allows me to assess different stocks on a more comparable basis, using the latest information. For SGOCO Group, the latest earnings -$4.8M, which, against the previous year's figure, has become more negative. Since these values are fairly short-term, I have calculated an annualized five-year value for SGOC's net income, which stands at $5.1M.

Additionally, we can assess SGOCO Group's loss by researching what has been happening in the industry as well as within the company. First, I want to briefly look into the line items. Revenue growth over last few years has been negative at -41.57%. The key to profitability here is to make sure the company’s cost growth is well-managed. Viewing growth from a sector-level, the US household durables industry has been growing its average earnings by double-digit 11.28% over the previous twelve months, and 15.09% over the past five years. This means whatever uplift the industry is benefiting from, SGOCO Group has not been able to leverage it as much as its average peer.

What does this mean?

SGOCO Group's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that incur net loss is always difficult to envisage what will occur going forward, and when. The most useful step is to examine company-specific issues SGOCO Group may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research SGOCO Group to get a more holistic view of the stock by looking at:

1. Financial Health: Is SGOC’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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.