In this article, I will take a look at REFFIND Ltd’s (ASX:RFN) most recent earnings update (30 June 2017) and compare these latest figures against its performance over the past few years, along with how the rest of RFN’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. View our latest analysis for REFFIND
How RFN fared against its long-term earnings performance and its industry
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 technique enables me to assess different companies on a similar basis, using the latest information. For REFFIND, its most recent bottom-line is -A$2.7M, which, in comparison to last year’s level, has become less negative. Given that these figures may be fairly short-term, I have computed an annualized five-year figure for RFN’s earnings, which stands at -A$4.7M. This suggests that, though net income is negative, it has become less negative over the years.
We can further analyze REFFIND’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 risen by 76.61%, implying that REFFIND is in a high-growth phase with expenses shooting ahead of high top-line growth rates, leading to yearly losses. Inspecting growth from a sector-level, the Australian software industry has been growing its average earnings by double-digit 15.42% over the prior twelve months, and 12.47% over the previous five years. This suggests that, despite the fact that REFFIND is presently running a loss, it may have benefited from industry tailwinds, moving earnings towards to right direction.
What does this mean?
Though REFFIND’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to predict what will occur going forward, and when. The most valuable step is to examine company-specific issues REFFIND may be facing and whether management guidance has steadily been met in the past. You should continue to research REFFIND to get a better picture of the stock by looking at:
1. Financial Health: Is RFN’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.