Examining how AudioEye, Inc. (NASDAQ:AEYE) is performing as a company requires looking at more than just a years' earnings. Below, I will run you through a simple sense check to build perspective on how AudioEye is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its software industry peers.
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Commentary On AEYE's Past Performance
AEYE is loss-making, with the most recent trailing twelve-month earnings of -US$6.1m (from 31 March 2019), which compared to last year has become more negative. Furthermore, the company's loss seem to be growing over time, with the five-year earnings average of -US$6.0m. Each year, for the past five years AEYE has seen an annual increase in operating expense growth, outpacing revenue growth of 49%, on average. This adverse movement is a driver of the company's inability to reach breakeven.
Eyeballing growth from a sector-level, the US software industry has been growing its average earnings by double-digit 32% in the prior twelve months,
Given that AudioEye is not profitable, even if operating expenses (SG&A and one-year R&D) continues to fall at previous year’s rate of -2.1%, the company’s current cash level (US$4.1m) will still be insufficient to cover its expenses in the upcoming year. This is not a great sign in terms of operations and cash management. Although this is a relatively simplistic calculation, and AudioEye may continue to reduce its costs further or raise debt capital instead of coming to equity markets, the analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
What does this mean?
AudioEye's track record can be a valuable insight into its earnings performance, but it certainly 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 AudioEye may be facing and whether management guidance has regularly been met in the past. You should continue to research AudioEye to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AEYE’s future growth? Take a look at our free research report of analyst consensus for AEYE’s outlook.
- Financial Health: Are AEYE’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 March 2019. This may not be consistent with full year annual report figures.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.