Does eServGlobal Limited’s (ASX:ESV) Latest Financial Perfomance Look Strong?
When eServGlobal Limited (ASX:ESV) announced its most recent earnings (30 April 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well eServGlobal has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see ESV has performed. Check out our latest analysis for eServGlobal
Did ESV beat its long-term earnings growth trend and its industry?
I look at 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 analyze many different companies on a similar basis, using the most relevant data points. For eServGlobal, its latest twelve-month earnings is -A$24.0M, which compared to last year’s figure, has become less negative. Since these figures are relatively short-term thinking, I’ve calculated an annualized five-year value for eServGlobal’s net income, which stands at -A$3.9M. This means that, eServGlobal has historically performed better than recently, although it seems like earnings are now heading back towards a more favorable position once more.
We can further examine eServGlobal’s loss by looking at what has been happening in the industry as well as within the company. Firstly, I want to quickly look into the line items. Revenue growth over the past couple of years has been negative at -12.44%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Inspecting growth from a sector-level, the Australian software industry has been growing its average earnings by double-digit 15.42% over the past year, and 12.47% over the previous few years. This shows that, while eServGlobal 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 eServGlobal’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to envisage what will occur going forward, and when. The most useful step is to examine company-specific issues eServGlobal may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research eServGlobal to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for ESV’s future growth? Take a look at our free research report of analyst consensus for ESV’s outlook.
2. Financial Health: Is ESV’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 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.
