Advertisement
U.S. markets closed
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow 30

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Russell 2000

    2,124.55
    +10.20 (+0.48%)
     
  • Crude Oil

    83.11
    -0.06 (-0.07%)
     
  • Gold

    2,254.80
    +16.40 (+0.73%)
     
  • Silver

    25.10
    +0.18 (+0.74%)
     
  • EUR/USD

    1.0782
    -0.0012 (-0.11%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2626
    +0.0004 (+0.03%)
     
  • USD/JPY

    151.3450
    -0.0270 (-0.02%)
     
  • Bitcoin USD

    69,980.05
    -630.95 (-0.89%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,369.44
    +201.37 (+0.50%)
     

Should You Be Concerned About GSE Systems Inc’s (GVP) -37.2% Earnings Decline?

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 GSE Systems Inc (AMEX:GVP) useful as an attempt to give more color around how GSE Systems is currently performing. View our latest analysis for GSE Systems

Was GVP’s recent earnings decline indicative of a tough track record?

For the most up-to-date info, 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 enables me to analyze different stocks on a more comparable basis, using the most relevant data points. GSE Systems’s most recent bottom-line is $1M, which compared to the prior year’s figure, has taken a dive by a substantial -33.52%. Given that these values may be relatively nearsighted, I’ve calculated an annualized five-year value for GSE Systems’s net income, which stands at -$3M. This means that although earnings growth was negative against the previous year, over the past couple of years, GSE Systems’s profits have been increasing on average.

AMEX:GVP Income Statement Nov 22nd 17
AMEX:GVP Income Statement Nov 22nd 17

What’s enabled this growth? Let’s take a look at if it is solely because of industry tailwinds, or if GSE Systems has seen some company-specific growth. Over the last few years, GSE Systems top-line expansion has outpaced earnings and the growth rate of expenses. Though this brought about a margin contraction, it has cushioned GSE Systems’s earnings contraction. Eyeballing growth from a sector-level, the US software industry has been growing its average earnings by double-digit 18.12% in the previous twelve months, and a more subdued 7.70% over the past five. This means that whatever tailwind the industry is enjoying, GSE Systems has not been able to realize the gains unlike its average peer.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies are profitable, but have unpredictable earnings, can have many factors influencing its business. I suggest you continue to research GSE Systems to get a more holistic view of the stock by looking at:

1. Financial Health: Is GVP’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 GVP 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 GVP 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.

Advertisement