After reading Technical Communications Corporation’s (NASDAQ:TCCO) most recent earnings announcement (30 September 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. See our latest analysis for Technical Communications
How TCCO fared against its long-term earnings performance and its industry
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend enables me to assess different stocks in a uniform manner using the latest information. For Technical Communications, its most recent earnings (trailing twelve month) is -$1.4M, which compared to the previous year’s figure, has become less negative. Given that these values may be somewhat short-term, I have estimated an annualized five-year figure for Technical Communications’s net income, which stands at -$0.7M. This suggests that, Technical Communications has historically performed better than recently, despite the fact that it seems like earnings are now heading back towards to right direction again.
We can further evaluate Technical Communications’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Technical Communications has seen an annual decline in revenue of -24.67%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the US communications industry has been growing its average earnings by double-digit 17.74% in the past twelve months, and 11.35% over the past five. This means that, though Technical Communications is presently loss-making, it may have gained from industry tailwinds, moving earnings towards to right direction.
What does this mean?
Though Technical Communications’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to predict what will occur going forward, and when. The most useful step is to examine company-specific issues Technical Communications may be facing and whether management guidance has consistently been met in the past. You should continue to research Technical Communications to get a better picture of the stock by looking at:
- 1. Financial Health: Is TCCO’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.