After reading Broad Gate SA.’s (WSE:BDG) most recent earnings announcement (31 December 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. View our latest analysis for Broad Gate
Was BDG’s recent earnings decline indicative of a tough track record?
I look at data from the most recent 12 months, 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 method enables me to assess many different companies in a uniform manner using the most relevant data points. For Broad Gate, its latest trailing-twelve-month earnings is -ZŁ604.98K, which compared to last year’s figure, has turned from positive to negative. Since these values may be fairly short-term thinking, I’ve determined an annualized five-year value for Broad Gate’s net income, which stands at ZŁ586.30K.
We can further examine Broad Gate’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Broad Gate’s top-line has risen by 18.79% on average, indicating that the company is in a high-growth phase with expenses racing ahead revenues, leading to annual losses. Looking at growth from a sector-level, the PL food industry has been relatively flat in terms of earnings growth in the previous twelve months, evening out from a notable 10.36% over the last five years. This means that any near-term headwind the industry is enduring, it’s hitting Broad Gate harder than its peers.
What does this mean?
Though Broad Gate’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 insightful step is to assess company-specific issues Broad Gate may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Broad Gate to get a more holistic view of the stock by looking at:
- Financial Health: Is BDG’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.
- 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 31 December 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.