Understanding Eight Solutions Inc’s (DB:G82) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Eight Solutions is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. Check out our latest analysis for Eight Solutions
Did G82 perform worse than its track record and industry?
I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This allows me to assess many different companies on a more comparable basis, using new information. For Eight Solutions, its most recent earnings (trailing twelve month) is -CA$3.20M, which compared to the previous year’s level, has become more negative. Given that these figures may be relatively short-term, I’ve calculated an annualized five-year figure for G82’s earnings, which stands at -CA$4.09M. This shows that, despite the fact that net income is negative, it has become less negative over the years.
We can further examine Eight Solutions’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Eight Solutions has seen an annual decline in revenue of -5.63%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Eyeballing growth from a sector-level, the DE software industry has been growing its average earnings by double-digit 13.70% in the previous year, and 12.65% over the previous five years. This means whatever uplift the industry is profiting from, Eight Solutions has not been able to reap as much as its average peer.
What does this mean?
Though Eight Solutions’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to predict what will occur going forward, and when. The most useful step is to examine company-specific issues Eight Solutions may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Eight Solutions to get a better picture of the stock by looking at:
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Financial Health: Is G82’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.
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Valuation: What is G82 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether G82 is currently mispriced by the market.
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Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.