After looking at Qualstar Corporation’s (NASDAQ:QBAK) latest earnings announcement (30 September 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. 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 Qualstar
Commentary On QBAK’s Past Performance
I like to use the ‘latest twelve-month’ data, 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 method enables me to analyze various companies on a more comparable basis, using new information. Qualstar’s most recent bottom-line -$0M, which, in comparison to last year’s figure, has become less negative. Given that these values are somewhat short-term, I’ve calculated an annualized five-year figure for QBAK’s net income, which stands at -$4M. This means even though net income is negative, it has become less negative over the years.
Additionally, we can evaluate Qualstar’s loss by researching what has been happening in the industry as well as within the company. Firstly, I want to quickly look into the line items. Revenue growth over past couple of years has been negative at -10.61%. The key to profitability here is to make sure the company’s cost growth is well-managed. Looking at growth from a sector-level, the US technology hardware, storage and peripherals industry has been growing its average earnings by double-digit 12.55% in the prior twelve months, . This is a turnaround from a volatile drop of -2.07% in the past few years. This suggests that, while Qualstar is currently unprofitable, it may have only just benefited from the recent industry expansion, moving earnings towards to right direction.
What does this mean?
Though Qualstar’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 envisage what will happen in the future and when. The most useful step is to examine company-specific issues Qualstar may be facing and whether management guidance has dependably been met in the past. You should continue to research Qualstar to get a better picture of the stock by looking at:
1. Financial Health: Is QBAK’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. Valuation: What is QBAK worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether QBAK is currently mispriced by the market.
3. 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.