Examining Universal Security Instruments Inc’s (AMEX:UUU) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess UUU’s latest performance announced on 31 December 2017 and weigh these figures against its longer term trend and industry movements. View our latest analysis for Universal Security Instruments
Was UUU’s recent earnings decline indicative of a tough track record?
I prefer to use the ‘latest twelve-month’ data, 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 blend allows me to analyze different companies in a uniform manner using the latest information. For Universal Security Instruments, its latest earnings (trailing twelve month) is -US$2.78M, which, against the previous year’s figure, has become more negative. Given that these figures may be somewhat myopic, I have estimated an annualized five-year value for UUU’s net income, which stands at -US$2.04M. This doesn’t seem to paint a better picture, as earnings seem to have gradually been getting more and more negative over time.
We can further evaluate Universal Security Instruments’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Universal Security Instruments’s revenue growth has been fairly muted, with an annual growth rate of 0.19%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Scanning growth from a sector-level, the US electronic industry has been growing its average earnings by double-digit 16.53% in the prior twelve months, and 10.05% over the previous five years. This means any tailwind the industry is deriving benefit from, Universal Security Instruments 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 that incur net loss is always difficult to predict what will happen in the future and when. The most useful step is to assess company-specific issues Universal Security Instruments may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Universal Security Instruments to get a better picture of the stock by looking at:
- Financial Health: Is UUU’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.