Does Aviat Networks Inc’s (NASDAQ:AVNW) Past Performance Indicate A Stronger Future?
When Aviat Networks Inc’s (NASDAQ:AVNW) announced its latest earnings (29 September 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Aviat Networks’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not AVNW actually performed well. Below is a quick commentary on how I see AVNW has performed. See our latest analysis for Aviat Networks
Were AVNW’s earnings stronger than its past performances and the industry?
I prefer 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 enables me to examine different stocks in a uniform manner using the most relevant data points. For Aviat Networks, its latest trailing-twelve-month earnings is -US$851.00K, which compared to last year’s figure, has become less negative. Since these figures are relatively nearsighted, I’ve computed an annualized five-year value for AVNW’s net income, which stands at -US$29.86M. This suggests that, while net income is negative, it has become less negative over the years.
We can further assess Aviat Networks’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Aviat Networks has seen an annual decline in revenue of -11.04%, 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 US communications industry has been growing its average earnings by double-digit 17.74% over the previous year, and 11.35% over the past five years. This suggests that, though Aviat Networks is currently running a loss, it may have been aided by industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Though Aviat Networks’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 happen in the future and when. The most insightful step is to assess company-specific issues Aviat Networks may be facing and whether management guidance has regularly been met in the past. You should continue to research Aviat Networks to get a better picture of the stock by looking at:
1. Financial Health: Is AVNW’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 AVNW 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 AVNW 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 29 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.
