Did Drewex SA.’s (WSE:DRE) Earnings Growth Outperform The Industry?
For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Drewex SA. (WSE:DRE) useful as an attempt to give more color around how Drewex is currently performing. Check out our latest analysis for Drewex
Did DRE beat its long-term earnings growth trend and its industry?
I like to use data from the most recent 12 months, 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 method allows me to analyze different stocks in a uniform manner using the latest information. For Drewex, its most recent earnings (trailing twelve month) is -ZŁ379.03K, which, relative to last year’s figure, has become less negative. Since these values may be somewhat short-term thinking, I have created an annualized five-year figure for Drewex’s net income, which stands at -ZŁ4.47M. This shows that, while net income is negative, it has become less negative over the years.
We can further examine Drewex’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Drewex has seen an annual decline in revenue of -50.75%, 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 PL consumer durables industry has been growing, albeit, at a subdued single-digit rate of 9.66% in the prior twelve months, and 8.77% over the last five years. This means though Drewex is currently running a loss, it may have been aided by industry tailwinds, moving earnings in the right direction.
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 hard to predict what will happen in the future and when. The most valuable step is to assess company-specific issues Drewex may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Drewex to get a more holistic view of the stock by looking at:
1. Financial Health: Is DRE’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. Valuation: What is DRE worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether DRE is currently mispriced by the market.
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 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.
