For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Coda Octopus Group Inc (NASDAQ:CODA) useful as an attempt to give more color around how Coda Octopus Group is currently performing. View our latest analysis for Coda Octopus Group
Was CODA’s weak performance lately a part of a long-term decline?
I use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method enables me to analyze different companies on a more comparable basis, using the latest information. For Coda Octopus Group, its most recent bottom-line (trailing twelve month) is US$1.60M, which compared to last year’s level, has fallen by a substantial -74.25%. Since these figures may be relatively nearsighted, I’ve estimated an annualized five-year figure for CODA’s net income, which stands at US$3.41M This doesn’t seem to paint a better picture, as earnings seem to have gradually been deteriorating over time.
Why could this be happening? Let’s examine what’s going on with margins and whether the entire industry is experiencing the hit as well. Revenue growth over the past couple of years, has been positive, however, earnings growth has been lagging behind meaning Coda Octopus Group has been ramping up its expenses by a lot more. This hurts margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the US electronic industry has been growing its average earnings by double-digit 16.29% over the previous year, and 10.88% over the past half a decade. This shows that any uplift the industry is benefiting from, Coda Octopus Group has not been able to realize the gains unlike its industry peers.
What does this mean?
Though Coda Octopus Group’s past data is helpful, it is only one aspect of my investment thesis. Generally companies that experience a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry disruption and growth. I suggest you continue to research Coda Octopus Group to get a better picture of the stock by looking at:
- 1. Financial Health: Is CODA’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 CODA 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 CODA 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 trailing twelve months from 31 January 2018. 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.