After looking at Digital Avenue SA.’s (WSE:DGL) latest earnings announcement (30 September 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Digital Avenue’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. Check out our latest analysis for Digital Avenue
Did DGL beat its long-term earnings growth trend and its industry?
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 blend enables me to assess different companies in a uniform manner using new information. For Digital Avenue, its most recent trailing-twelve-month earnings is -ZŁ226.91K, which compared to last year’s level, has become less negative. Since these figures may be fairly short-term thinking, I’ve determined an annualized five-year value for DGL’s net income, which stands at -ZŁ916.89K. This shows that, even though net income is negative, it has become less negative over the years.
We can further evaluate Digital Avenue’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Digital Avenue has seen an annual decline in revenue of -22.23%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the PL internet industry has been growing, albeit, at a unexciting single-digit rate of 9.52% over the previous twelve months, and a substantial 20.19% over the past five. This means though Digital Avenue is presently unprofitable, it may have been aided by industry tailwinds, moving earnings towards to right direction.
What does this mean?
Digital Avenue’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always hard to envisage what will happen in the future and when. The most insightful step is to examine company-specific issues Digital Avenue may be facing and whether management guidance has dependably been met in the past. You should continue to research Digital Avenue to get a better picture of the stock by looking at:
- 1. Financial Health: Is DGL’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 DGL 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 DGL 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 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.