For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Advanced Braking Technology Limited (ASX:ABV) useful as an attempt to give more color around how Advanced Braking Technology is currently performing. View our latest analysis for Advanced Braking Technology
How Did ABV’s Recent Performance Stack Up Against Its Past?
I look at data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method enables me to analyze different stocks in a uniform manner using new information. For Advanced Braking Technology, the most recent bottom-line -A$0.6M, which compared to the prior year’s level, has become less negative. Since these values are fairly nearsighted, I’ve calculated an annualized five-year figure for Advanced Braking Technology’s earnings, which stands at -A$2.0M. This means that, despite the fact that net income is negative, it has become less negative over the years.
We can further evaluate Advanced Braking Technology’s loss by looking at what’s going on in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last couple of years has been negative at -2.58%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Scanning growth from a sector-level, the Australian auto components industry has been growing, albeit, at a muted single-digit rate of 3.32% over the past year, . This is a change from a volatile drop of -3.75% in the previous couple of years. This suggests that whatever recent headwind the industry is facing, Advanced Braking Technology is less exposed compared to its peers.
What does this mean?
Advanced Braking Technology’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to predict what will happen in the future and when. The most valuable step is to assess company-specific issues Advanced Braking Technology may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Advanced Braking Technology to get a more holistic view of the stock by looking at:
1. Financial Health: Is ABV’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.