Today I will examine Meitu Inc’s (SEHK:1357) latest earnings update (30 June 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of 1357’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. See our latest analysis for Meitu
Was 1357’s weak performance lately a part of a long-term decline?
I prefer to 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 enables me to examine different stocks in a uniform manner using the most relevant data points. For Meitu, its latest twelve-month earnings is -CN¥4,202.9M, which, in comparison to last year’s level, has become more negative. Since these values may be somewhat nearsighted, I have determined an annualized five-year figure for Meitu’s earnings, which stands at -CN¥3,358.4M. This doesn’t look much better, as earnings seem to have gradually been getting more and more negative over time.
Additionally, we can examine Meitu’s loss by looking at what’s going on in the industry as well as within the company. Initially, I want to quickly look into the line items. Revenue growth over the last few years has increased by 56.10%, indicating that Meitu is in a high-growth period with expenses shooting ahead of elevated top-line growth rates, leading to yearly losses. Scanning growth from a sector-level, the HK technology hardware, storage and peripherals industry has been growing its average earnings by double-digit 42.56% in the prior twelve months, and a less exciting 9.02% over the previous five years. This means whatever uplift the industry is deriving benefit from, Meitu has not been able to gain as much as its average peer.
What does this mean?
Though Meitu’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 occur going forward, and when. The most insightful step is to examine company-specific issues Meitu may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Meitu to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for 1357’s future growth? Take a look at our free research report of analyst consensus for 1357’s outlook.