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For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Research Frontiers Incorporated (NASDAQ:REFR) useful as an attempt to give more color around how Research Frontiers is currently performing. View our latest analysis for Research Frontiers
Commentary On REFR’s Past Performance
I like to 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 method allows me to analyze various companies on a more comparable basis, using new information. For Research Frontiers, its latest earnings (trailing twelve month) is -US$3.13M, which compared to the previous year’s level, has become less negative. Since these figures may be somewhat nearsighted, I have computed an annualized five-year value for Research Frontiers’s net income, which stands at -US$4.20M. This means that, despite the fact that net income is negative, it has become less negative over the years.
We can further assess Research Frontiers’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Research Frontiers’s top-line has grown by a mere 3.57%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Eyeballing growth from a sector-level, the US electronic industry has been growing its average earnings by double-digit 16.29% over the prior year, and 10.88% over the previous five years. This shows that, even though Research Frontiers is currently loss-making, 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 difficult to envisage what will occur going forward, and when. The most insightful step is to assess company-specific issues Research Frontiers may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Research Frontiers to get a better picture of the stock by looking at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.
1. Financial Health: Is REFR’s operations financially sustainable? Balance sheets can be hard to analyze, which is why Simply Wall St does it for you. Check out important financial health checks here.
2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore a 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.