Assessing Xunlei Limited’s (NASDAQ:XNET) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess XNET’s recent performance announced on 30 September 2017 and evaluate these figures to its longer term trend and industry movements. Check out our latest analysis for Xunlei
Was XNET weak performance lately part of a long-term decline?
I like to 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 allows me to analyze various companies in a uniform manner using the latest information. For Xunlei, its latest earnings (trailing twelve month) is -$48.9M, which compared to the prior year’s level, has become more negative. Since these figures are relatively short-term thinking, I’ve determined an annualized five-year value for Xunlei’s net income, which stands at -$27.3M. This doesn’t seem to paint a better picture, as earnings seem to have consistently been getting more and more negative over time.
Additionally, we can evaluate Xunlei’s loss by looking at what’s going on in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over the last couple of years has risen by a mere 8.63%. Since top-line growth is also pretty stale the key to profitability moving forward would be managing cost growth rates. Inspecting growth from a sector-level, the US internet industry has been growing, albeit, at a unexciting single-digit rate of 7.42% in the past year, and a substantial 15.52% over the past five years. This means any tailwind the industry is profiting from, Xunlei has not been able to realize the gains unlike its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most valuable step is to assess company-specific issues Xunlei may be facing and whether management guidance has dependably been met in the past. You should continue to research Xunlei to get a more holistic view of the stock by looking at:
1. Financial Health: Is XNET’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. 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 30 September 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.