After looking at CoAssets Limited’s (ASX:CA8) latest earnings update (30 June 2017), I found it helpful to revisit the company’s performance in the past couple of years 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 an important aspect. In this article I briefly touch on my key findings. See our latest analysis for CoAssets
Did CA8 perform worse than its track record and industry?
I like to use 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 blend allows me to analyze different companies on a similar basis, using the most relevant data points. For CoAssets, the latest twelve-month earnings -SGD6.3M, which, against last year’s figure, has become more negative. Given that these figures are fairly nearsighted, I’ve determined an annualized five-year value for CA8’s net income, which stands at -SGD3.9M. This doesn’t seem to paint a better picture, since earnings seem to have steadily been getting more and more negative over time.
We can further evaluate CoAssets’s loss by looking at what has been happening in the industry as well as within the company. Initially, I want to briefly look into the line items. Revenue growth over the last couple of years has grown by a mere 8.90%. Given that top-line growth is also pretty stale the key to profitability going forward would be managing costs. Viewing 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 whatever near-term headwind the industry is experiencing, it’s hitting CoAssets harder than its peers.
What does this mean?
Though CoAssets’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to predict what will happen in the future and when. The most insightful step is to assess company-specific issues CoAssets may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research CoAssets to get a better picture of the stock by looking at:
1. Financial Health: Is CA8’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.