Assessing IODM Limited’s (ASX:IOD) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how IODM is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its internet software and services industry peers. See our latest analysis for IODM
Could IOD beat the long-term trend and outperform its industry?
I 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 technique enables me to examine different companies on a similar basis, using the latest information. For IODM, its latest twelve-month earnings is -A$1.9M, which, in comparison to the prior year’s figure, has become less negative. Given that these figures are somewhat myopic, I’ve computed an annualized five-year figure for IOD’s earnings, which stands at -A$3.7M. This suggests that, even though net income is negative, it has become less negative over the years.
We can further assess IODM’s loss by researching what has been happening in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over the last few years has more than doubled, indicating that IODM is in a high-growth period with expenses shooting ahead of high top-line growth rates, leading to yearly losses. Eyeballing growth from a sector-level, the Australian internet software and services industry has been relatively flat in terms of earnings growth over the previous couple of years. This shows that despite the fact that IODM is presently running a loss, any near-term headwind the industry is facing, the impact on IODM has been softer relative to its peers.
What does this mean?
Though IODM’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 predict what will happen in the future and when. The most valuable step is to examine company-specific issues IODM may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research IODM to get a more holistic view of the stock by looking at:
1. Financial Health: Is IOD’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.
2. 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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.