When Estre Ambiental Inc (NASDAQ:ESTR) released its most recent earnings update (30 June 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Estre Ambiental’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not ESTR actually performed well. Below is a quick commentary on how I see ESTR has performed. Check out our latest analysis for Estre Ambiental
How Did ESTR’s Recent Performance Stack Up Against Its Past?
I look at data from the most recent 12 months, 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 method allows me to examine various companies on a similar basis, using the latest information. For Estre Ambiental, its latest earnings (trailing twelve month) is -R$122.93M, which, relative to last year’s figure, has become less negative. Since these figures are somewhat short-term, I have created an annualized five-year value for Estre Ambiental’s net income, which stands at -R$229.18M. This shows that, while net income is negative, it has become less negative over the years.
We can further analyze Estre Ambiental’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Estre Ambiental’s top-line has increased by a mere 4.50%, 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 commercial services industry has been growing, albeit, at a unexciting single-digit rate of 6.32% over the previous twelve months, and a substantial 11.14% over the past half a decade. This shows that, even though Estre Ambiental is currently loss-making, it may have benefited from industry tailwinds, moving earnings into a more favorable position.
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 forecast what will happen in the future and when. The most valuable step is to examine company-specific issues Estre Ambiental may be facing and whether management guidance has regularly been met in the past. You should continue to research Estre Ambiental to get a more holistic view of the stock by looking at:
- Financial Health: Is ESTR’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 30 June 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.