After looking at CloudBuy plc’s (AIM:CBUY) latest earnings update (30 June 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. Check out our latest analysis for CloudBuy
Commentary On CBUY’s Past Performance
I 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 assess many different companies on a similar basis, using new information. For CloudBuy, its most recent bottom-line is -£3.2M, which, in comparison to the previous year’s level, has become less negative. Given that these values may be somewhat nearsighted, I have created an annualized five-year figure for CBUY’s earnings, which stands at -£2.5M. This means that, CloudBuy has historically performed better than recently, despite the fact that it seems like earnings are now heading back towards to right direction again.
Additionally, we can evaluate CloudBuy’s loss by looking at what has been happening in the industry as well as within the company. Initially, I want to quickly look into the line items. Revenue growth over the past couple of years has been negative at -5.22%. 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 UK internet industry has been growing its average earnings by double-digit 14.72% over the previous twelve months, and 14.24% over the past five. This means even though CloudBuy is presently unprofitable, it may have gained from industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Though CloudBuy’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to envisage what will happen in the future and when. The most valuable step is to assess company-specific issues CloudBuy may be facing and whether management guidance has regularly been met in the past. You should continue to research CloudBuy to get a better picture of the stock by looking at:
1. Financial Health: Is CBUY’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.