For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on eCargo Holdings Limited (ASX:ECG) useful as an attempt to give more color around how eCargo Holdings is currently performing. Check out our latest analysis for eCargo Holdings
Was ECG weak performance lately part of a long-term decline?
I prefer 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 many different companies on a more comparable basis, using the most relevant data points. eCargo Holdings’s latest earnings -HK$94.6M, which compared to the previous year’s figure, has become more negative. Since these figures are relatively short-term, I’ve computed an annualized five-year value for eCargo Holdings’s earnings, which stands at -HK$73.8M. This doesn’t seem to paint a better picture, since earnings seem to have gradually been getting more and more negative over time.
We can further evaluate eCargo Holdings’s loss by researching what has been happening in the industry as well as within the company. First, I want to briefly look into the line items. Revenue growth over the last couple of years has increased by 29.83%, indicating that eCargo Holdings is in a high-growth phase with expenses shooting ahead of high top-line growth rates. Inspecting growth from a sector-level, the Australian internet software and services industry has been relatively flat in terms of earnings growth over the past few years. This means that whatever recent headwind the industry is experiencing, it’s hitting eCargo Holdings harder than its peers.
What does this mean?
eCargo Holdings’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 difficult to forecast what will occur going forward, and when. The most useful step is to examine company-specific issues eCargo Holdings may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research eCargo Holdings to get a more holistic view of the stock by looking at:
1. Financial Health: Is ECG’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.