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 Digimarc Corporation (NASDAQ:DMRC) useful as an attempt to give more color around how Digimarc is currently performing. See our latest analysis for Digimarc
Despite a decline, did DMRC underperform the long-term trend and the industry?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, 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 blend enables me to examine various companies in a uniform manner using new information. For Digimarc, the latest twelve-month earnings -$23.2M, which, against the previous year’s level, has become more negative. Since these figures may be relatively short-term, I’ve estimated an annualized five-year value for DMRC’s earnings, which stands at -$7.1M. This doesn’t seem to paint a better picture, since earnings seem to have steadily been getting more and more negative over time.
Additionally, we can assess Digimarc’s loss by looking at what has been happening in the industry on top of 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 -9.87%. The key to profitability here is to make sure the company’s cost growth is well-managed. Eyeballing growth from a sector-level, the US software industry has been growing its average earnings by double-digit 17.16% over the prior twelve months, and 11.56% over the previous five years. This shows that whatever uplift the industry is benefiting from, Digimarc has not been able to gain as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to predict what will occur going forward, and when. The most valuable step is to examine company-specific issues Digimarc may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Digimarc to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for DMRC’s future growth? Take a look at our free research report of analyst consensus for DMRC’s outlook.
2. Financial Health: Is DMRC’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.