When Inabox Group Limited’s (ASX:IAB) announced its latest earnings (30 June 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Inabox Group’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not IAB actually performed well. Below is a quick commentary on how I see IAB has performed. View our latest analysis for Inabox Group
Commentary On IAB’s Past Performance
I prefer to use the ‘latest twelve-month’ data, 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 allows me to examine many different companies in a uniform manner using the most relevant data points. For Inabox Group, the most recent earnings is A$0.1M, which, against the previous year’s figure, has plunged by a large -89.99%. Since these figures may be relatively short-term, I have estimated an annualized five-year figure for Inabox Group’s net income, which stands at A$0.5M. This doesn’t look much better, since earnings seem to have gradually been declining over the longer term.
What could be happening here? Well, let’s look at what’s going on with margins and if the whole industry is experiencing the hit as well. Revenue growth over the past few years, has been positive, however earnings growth has been falling. This means Inabox Group has been growing expenses, which is hurting margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the Australian diversified telecommunication services industry has been growing, albeit, at a subdued single-digit rate of 9.28% over the previous year, and 7.85% over the past five. This shows that any tailwind the industry is profiting from, Inabox Group has not been able to reap as much as its industry peers.
What does this mean?
Though Inabox Group’s past data is helpful, it is only one aspect of my investment thesis. Typically companies that endure an extended period of decline in earnings are going through some sort of reinvestment phase in order to keep up with the recent industry disruption and expansion. I recommend you continue to research Inabox Group to get a more holistic view of the stock by looking at:
1. Financial Health: Is IAB’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.