Added Capital Inc (TSXV:AAD): Does -111.5% EPS Drop In A Year Reflect The Long-Term Trend?
Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Added Capital Inc’s (TSXV:AAD) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. View our latest analysis for Added Capital
Was AAD’s recent earnings decline indicative of a tough track record?
I 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 allows me to examine many different companies on a similar basis, using new information. Added Capital’s most recent twelve-month earnings -CA$0.1M, which, relative to the prior year’s level, has turned from positive to negative. Given that these values are fairly short-term, I’ve calculated an annualized five-year value for AAD’s earnings, which stands at -CA$0.9M. This shows that, despite the fact that net income is negative, it has become less negative over the years.
We can further evaluate Added Capital’s loss by looking at what has been happening in the industry on top of within the company. Initially, I want to briefly look into the line items. Revenue growth over past couple of years has been negative at -53.74%. The key to profitability here is to make sure the company’s cost growth is well-managed. Inspecting growth from a sector-level, the Canadian capital markets industry has been relatively flat in terms of earnings growth over the previous year, evening out from a robust 10.82% over the past five. This suggests that whatever near-term headwind the industry is experiencing, it’s hitting Added Capital harder than its peers.
What does this mean?
Though Added Capital’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most valuable step is to assess company-specific issues Added Capital may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Added Capital to get a more holistic view of the stock by looking at:
1. Financial Health: Is AAD’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. 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.
