After reading Skotan SA’s (WSE:SKT) latest earnings update (31 December 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether SKT has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. Check out our latest analysis for Skotan
How Did SKT’s Recent Performance Stack Up Against Its Past?
For the purpose of this commentary, 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 allows me to examine various companies in a uniform manner using the latest information. For Skotan, its most recent trailing-twelve-month earnings is -ZŁ4.14M, which, relative to the previous year’s figure, has become less negative. Given that these figures are relatively short-term thinking, I have determined an annualized five-year value for Skotan’s earnings, which stands at -ZŁ12.59M. This suggests that, though net income is negative, it has become less negative over the years.
We can further assess Skotan’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Skotan’s top-line has risen by 22.68% on average, implying that the company is in a high-growth phase with expenses racing ahead revenues, leading to annual losses. Looking at growth from a sector-level, the PL food industry has been growing, albeit, at a muted single-digit rate of 7.32% in the prior year, and 8.90% over the last five years. This shows that, even though Skotan is currently loss-making, it may have benefited from industry tailwinds, moving earnings in the right direction.
What does this mean?
Though Skotan’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to forecast what will occur going forward, and when. The most valuable step is to examine company-specific issues Skotan may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Skotan to get a more holistic view of the stock by looking at:
- Financial Health: Is SKT’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.