Examining Knosys Limited’s (ASX:KNO) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess KNO’s latest performance announced on 30 June 2017 and weigh these figures against its longer term trend and industry movements. Check out our latest analysis for Knosys
Commentary On KNO’s Past Performance
To account for any quarterly or half-yearly updates, 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 method allows me to analyze various companies on a more comparable basis, using the most relevant data points. Knosys’s latest twelve-month earnings -A$2.1M, which, against last year’s level, has become more negative. Given that these figures are somewhat short-term thinking, I have computed an annualized five-year value for Knosys’s earnings, which stands at -A$1.3M. This doesn’t look much better, since earnings seem to have gradually been getting more and more negative over time.
We can further analyze Knosys’s loss by looking at what’s going on in the industry along with within the company. Initially, I want to briefly look into the line items. Revenue growth over the past few years has grown by 32.74%, indicating that Knosys is in a high-growth phase with expenses shooting ahead of elevated top-line growth rates. Eyeballing growth from a sector-level, the Australian software industry has been growing its average earnings by double-digit 15.42% in the prior twelve months, and 12.47% over the previous few years. This shows that whatever tailwind the industry is benefiting from, Knosys has not been able to reap as much as its industry peers.
What does this mean?
Though Knosys’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to envisage what will occur going forward, and when. The most valuable step is to examine company-specific issues Knosys may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Knosys to get a better picture of the stock by looking at:
1. Financial Health: Is KNO’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.