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 Akamai Technologies Inc (NASDAQ:AKAM) useful as an attempt to give more color around how Akamai Technologies is currently performing. View our latest analysis for Akamai Technologies
Commentary On AKAM’s Past Performance
I look at 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 enables me to analyze different companies in a uniform manner using new information. For Akamai Technologies, its most recent earnings (trailing twelve month) is US$218.32M, which, relative to the prior year’s figure, has fallen by a significant -30.94%. Given that these values may be somewhat nearsighted, I’ve calculated an annualized five-year figure for Akamai Technologies’s net income, which stands at US$274.47M This doesn’t seem to paint a better picture, since earnings seem to have gradually been falling over time.
Why is this? Well, let’s take a look at what’s going on with margins and if the whole industry is feeling the heat. Revenue growth over the last couple of years, has been positive, however, earnings growth has been lagging behind meaning Akamai Technologies has been increasing its expenses by a lot more. This hurts margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the US internet industry has been growing its average earnings by double-digit 14.78% over the past year, and 16.95% over the past five. This means any uplift the industry is deriving benefit from, Akamai Technologies has not been able to leverage it as much as its industry peers.
What does this mean?
Though Akamai Technologies’s past data is helpful, it is only one aspect of my investment thesis. Usually companies that endure a prolonged period of diminishing earnings are going through some sort of reinvestment phase in order to keep up with the latest industry disruption and growth. I suggest you continue to research Akamai Technologies to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AKAM’s future growth? Take a look at our free research report of analyst consensus for AKAM’s outlook.
- Financial Health: Is AKAM’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.