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Does Energy Focus Inc’s (NASDAQ:EFOI) Past Performance Indicate A Stronger Future?

Lawrence Carr

When Energy Focus Inc (NASDAQ:EFOI) released its most recent earnings update (31 March 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Energy Focus performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see EFOI has performed. See our latest analysis for Energy Focus

How Did EFOI’s Recent Performance Stack Up Against Its Past?

I prefer to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to assess many different companies on a more comparable basis, using new information. For Energy Focus, its most recent bottom-line (trailing twelve month) is -US$9.13M, which compared to the previous year’s figure, has become less negative. Since these values may be somewhat short-term thinking, I have determined an annualized five-year value for Energy Focus’s net income, which stands at -US$5.99M. This shows that, Energy Focus has historically performed better than recently, while it seems like earnings are now heading back towards a more favorable position once more.

NasdaqCM:EFOI Income Statement May 17th 18

We can further evaluate Energy Focus’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Energy Focus’s top-line has risen by a mere 5.93%, 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 electrical industry has been growing, albeit, at a unexciting single-digit rate of 8.20% over the previous year, and a substantial 13.48% over the past half a decade. This means that, while Energy Focus is currently loss-making, it may have been aided by industry tailwinds, moving earnings into a more favorable position.

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 predict what will occur going forward, and when. The most valuable step is to examine company-specific issues Energy Focus may be facing and whether management guidance has steadily been met in the past. You should continue to research Energy Focus to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for EFOI’s future growth? Take a look at our free research report of analyst consensus for EFOI’s outlook.
  2. Financial Health: Is EFOI’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.
  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 31 March 2018. 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.