Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Rosetta Stone Inc’s (NYSE:RST) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. See our latest analysis for Rosetta Stone
Did RST beat its long-term earnings growth trend and its industry?
To account for any quarterly or half-yearly updates, 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 technique enables me to assess many different companies on a similar basis, using the latest information. For Rosetta Stone, its most recent bottom-line (trailing twelve month) is -US$1.55M, which, relative to the previous year’s figure, has become less negative. Since these figures are relatively short-term, I have computed an annualized five-year value for Rosetta Stone’s net income, which stands at -US$31.82M. This suggests that, despite the fact that net income is negative, it has become less negative over the years.
We can further examine Rosetta Stone’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Rosetta Stone has seen an annual decline in revenue of -6.14%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Eyeballing growth from a sector-level, the US software industry has been growing its average earnings by double-digit 11.76% in the past twelve months, and 14.14% over the past half a decade. This means that, although Rosetta Stone is presently running a loss, it may have benefited from industry tailwinds, moving earnings towards to right direction.
What does this mean?
Though Rosetta Stone’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to predict what will happen in the future and when. The most valuable step is to examine company-specific issues Rosetta Stone may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Rosetta Stone to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RST’s future growth? Take a look at our free research report of analyst consensus for RST’s outlook.
- Financial Health: Is RST’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.