For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Model N Inc (NYSE:MODN) useful as an attempt to give more color around how Model N is currently performing. Check out our latest analysis for Model N
Was MODN’s recent earnings decline indicative of a tough track record?
For the most up-to-date info, 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 blend enables me to analyze various companies on a similar basis, using new information. For Model N, its most recent earnings (trailing twelve month) is -US$37.20M, which compared to the prior year’s figure, has become more negative. Since these values are somewhat short-term, I’ve determined an annualized five-year figure for Model N’s net income, which stands at -US$19.32M. This doesn’t look much better, as earnings seem to have steadily been getting more and more negative over time.
We can further examine Model N’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Model N’s top-line has increased by a mere 7.92%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Inspecting growth from a sector-level, the US software industry has been growing its average earnings by double-digit 10.30% over the past twelve months, and 10.52% over the past half a decade. This means that whatever tailwind the industry is profiting from, Model N has not been able to leverage it as much as its industry peers.
What does this mean?
Though Model N’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to forecast what will occur going forward, and when. The most useful step is to examine company-specific issues Model N may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Model N to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for MODN’s future growth? Take a look at our free research report of analyst consensus for MODN’s outlook.
- 2. Financial Health: Is MODN’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.
- 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 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.