For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Versarien plc (AIM:VRS) useful as an attempt to give more color around how Versarien is currently performing. Check out our latest analysis for Versarien
Commentary On VRS’s Past Performance
For the purpose of this commentary, 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 blend allows me to examine many different companies on a more comparable basis, using the latest information. Versarien’s most recent earnings -£1.4M, which, relative to last year’s figure, has become less negative. Since these figures may be relatively myopic, I’ve determined an annualized five-year value for Versarien’s earnings, which stands at -£1.2M. This means that, Versarien has historically performed better than recently, despite the fact that it seems like earnings are now heading back towards a more favorable position once more.
Additionally, we can evaluate Versarien’s loss by looking at what has been happening in the industry on top of within the company. Firstly, I want to quickly look into the line items. Revenue growth over last couple of years has rose by 28.59%, signalling that Versarien is in a high-growth period with expenses shooting ahead of elevated top-line growth rates. Eyeballing growth from a sector-level, the UK chemicals industry has been growing its average earnings by double-digit 28.53% in the previous year, and a less exciting 4.19% over the previous five years. This suggests that, despite the fact that Versarien is presently loss-making, it may have benefited from industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Though Versarien’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 forecast what will happen in the future and when. The most valuable step is to examine company-specific issues Versarien may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Versarien to get a more holistic view of the stock by looking at:
1. Financial Health: Is VRS’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.