After reading Diebold Nixdorf Incorporated’s (NYSE:DBD) 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 out our latest analysis for Diebold Nixdorf
Did DBD’s recent earnings growth beat the long-term trend and the industry?DBD is loss-making, with the most recent trailing twelve-month earnings of -US$245.20m (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$30.82m. Each year, for the past five years DBD has seen an annual increase in operating expense growth, outpacing revenue growth of 5.75%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Eyeballing growth from a sector-level, the US tech industry has been growing, albeit, at a unexciting single-digit rate of 6.25% over the prior year, and 8.10% over the past five years. This suggests that any uplift the industry is benefiting from, Diebold Nixdorf has not been able to gain as much as its average peer.
Since Diebold Nixdorf is loss-making, with operating expenses (opex) growing year-on-year at 15.32%, it may need to raise more cash over the next year. It currently has US$389.90m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached US$953.60m in the latest twelve months. Although this is a relatively simplistic calculation, and Diebold Nixdorf may reduce its costs or open a new line of credit instead of issuing new equity shares, the analysis still helps us understand how sustainable the Diebold Nixdorf’s operation is, and when things may have to change.
What does this mean?
Diebold Nixdorf’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 valuable step is to examine company-specific issues Diebold Nixdorf may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Diebold Nixdorf to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DBD’s future growth? Take a look at our free research report of analyst consensus for DBD’s outlook.
- Financial Health: Is DBD’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.