In this commentary, I will examine Acorn International Inc’s (NYSE:ATV) latest earnings update (30 June 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the online retail industry performed. As an investor, I find it beneficial to assess ATV’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. View our latest analysis for Acorn International
Was ATV’s recent earnings decline indicative of a tough track record?
To account for any quarterly or half-yearly updates, I 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 blend enables me to assess many different companies on a more comparable basis, using new information. For Acorn International, the most recent twelve-month earnings -$7.1M, which, against the previous year’s figure, has become more negative. Since these values may be fairly nearsighted, I’ve estimated an annualized five-year value for ATV’s net income, which stands at -$20.5M. This means while net income is negative, it has become less negative over the years.
Additionally, we can examine Acorn International’s loss by researching what has been happening in the industry on top of within the company. First, I want to quickly look into the line items. Revenue growth over the past couple of years has been negative at -34.50%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Eyeballing growth from a sector-level, the US online retail industry has been growing average earnings growth of 80.31% over the prior twelve months, and a robust 13.08% over the past five years. This means whatever tailwind the industry is deriving benefit from, Acorn International has not been able to reap as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to envisage what will happen in the future and when. The most insightful step is to assess company-specific issues Acorn International may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Acorn International to get a better picture of the stock by looking at:
1. Financial Health: Is ATV’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 ATV 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 ATV 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.