Investors with a long-term horizong may find it valuable to assess Decimal Software Limited’s (ASX:DSX) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Decimal Software is currently performing. Check out our latest analysis for Decimal Software
How Well Did DSX Perform?
I prefer to 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 method enables me to analyze many different companies on a similar basis, using the latest information. For Decimal Software, the latest earnings -A$3.6M, which compared to the prior year’s figure, has become less negative. Since these values may be fairly myopic, I’ve estimated an annualized five-year value for DSX’s net income, which stands at -A$7.2M. This means though net income is negative, it has become less negative over the years.
We can further assess Decimal Software’s loss by researching what’s going on in the industry on top of within the company. Firstly, I want to briefly look into the line items. Revenue growth over last couple of years has grew by 44.67%, indicating that Decimal Software is in a high-growth period with expenses racing ahead high top-line growth rates. Eyeballing growth from a sector-level, the Australian internet software and services industry has been relatively flat in terms of earnings growth over the last few years. This means that whatever near-term headwind the industry is facing, Decimal Software is relatively better-cushioned than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to envisage what will happen in the future and when. The most valuable step is to assess company-specific issues Decimal Software may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Decimal Software to get a better picture of the stock by looking at:
1. Financial Health: Is DSX’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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.