Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Seafarms Group Limited’s (ASX:SFG) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. See our latest analysis for SFG
Could SFG beat the long-term trend and outperform its industry?
For the purpose of this commentary, I like 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 method allows me to examine different stocks on a more comparable basis, using new information. Seafarms Group’s most recent twelve-month earnings -A$19.8M, which, relative to the previous year’s figure, has become less negative. Given that these figures may be somewhat short-term, I’ve created an annualized five-year figure for Seafarms Group’s earnings, which stands at -A$7.2M. This means that, Seafarms Group has historically performed better than recently, although it seems like earnings are now heading back in the right direction again.
We can further examine Seafarms Group’s loss by researching what has been happening in the industry along with within the company. Initially, I want to quickly look into the line items. Revenue growth over last few years has been negative at -14.43%. The key to profitability here is to make sure the company’s cost growth is well-managed. Looking at growth from a sector-level, the Australian food products industry has been growing its average earnings by double-digit 16.20% over the prior twelve months, and 18.60% over the previous five years. This shows that, even though Seafarms Group is presently unprofitable, it may have benefited from industry tailwinds, moving earnings in the right direction.
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 happen in the future and when. The most useful step is to examine company-specific issues Seafarms Group may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Seafarms Group to get a more holistic view of the stock by looking at:
1. Financial Health: Is SFG’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.