After looking at DroneShield Limited’s (ASX:DRO) latest earnings announcement (30 June 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether DroneShield’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for DRO
Despite a decline, did DRO underperform the long-term trend and the industry?
For the purpose of this commentary, I like to 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 method enables me to assess various companies on a more comparable basis, using new information. For DroneShield, the most recent twelve-month earnings -A$5.4M, which compared to last year’s figure, has become more negative. Since these figures may be somewhat myopic, I have estimated an annualized five-year figure for DroneShield’s earnings, which stands at -A$3.1M. This doesn’t look much better, since earnings seem to have steadily been getting more and more negative over time.
We can further analyze DroneShield’s loss by looking at what’s going on in the industry on top of within the company. Initially, I want to quickly look into the line items. Revenue growth over last couple of years has rose by 59.85%, signalling that DroneShield is in a high-growth phase with expenses shooting ahead of elevated top-line growth rates. Viewing growth from a sector-level, the Australian aerospace and defense industry has been enduring some headwinds in the past twelve months, leading to an average earnings drop of -6.90%. This is a significant change, given that the industry has been delivering a positive rate of 3.03%, on average, over the past couple of years. This means whatever near-term headwind the industry is enduring, it’s hitting DroneShield harder than its peers.
What does this mean?
DroneShield’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to predict what will happen in the future and when. The most valuable step is to examine company-specific issues DroneShield may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research DroneShield to get a more holistic view of the stock by looking at: