Does 7digital Group plc’s (LON:7DIG) Past Performance Indicate A Weaker Future?
Examining 7digital Group plc’s (AIM:7DIG) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess 7DIG’s latest performance announced on 30 June 2017 and weight these figures against its longer term trend and industry movements. See our latest analysis for 7digital Group
Did 7DIG perform worse than its track record and industry?
For the purpose of this commentary, I like to use 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 enables me to examine many different companies in a uniform manner using the most relevant data points. For 7digital Group, its latest twelve-month earnings is -£5.1M, which, in comparison to the prior year’s level, has become more negative. Since these values are fairly short-term thinking, I’ve determined an annualized five-year value for 7digital Group’s earnings, which stands at -£4.8M. This doesn’t look much better, since earnings seem to have steadily been getting more and more negative over time.
We can further evaluate 7digital Group’s loss by researching what has been happening in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the past few years has risen by a mere 3.38%. Given that top-line growth is also pretty stale the key to profitability moving forward would be controlling cost growth rates. Looking at growth from a sector-level, the UK media industry has been enduring some headwinds over the past year, leading to an average earnings drop of -6.09%. This is a momentous change, given that the industry has been delivering a positive rate of 8.75%, on average, over the past couple of years. This suggests that whatever near-term headwind the industry is enduring, it’s hitting 7digital Group harder than its peers.
What does this mean?
Though 7digital Group’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most useful step is to examine company-specific issues 7digital Group may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research 7digital Group to get a more holistic view of the stock by looking at:
1. Financial Health: Is 7DIG’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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.
