In this article, I will take a look at Liquidity Services Inc’s (NASDAQ:LQDT) most recent earnings update (30 September 2017) and compare these latest figures against its performance over the past few years, along with how the rest of LQDT’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. See our latest analysis for Liquidity Services
How Well Did LQDT Perform?
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, 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 examine various companies on a more comparable basis, using the most relevant data points. For Liquidity Services, its most recent twelve-month earnings is -$39.2M, which, in comparison to last year’s level, has become less negative. Since these values may be somewhat nearsighted, I’ve estimated an annualized five-year value for LQDT’s net income, which stands at -$5.7M. This means that, Liquidity Services 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 assess Liquidity Services’s loss by looking at what has been happening in the industry as well as within the company. First, I want to briefly look into the line items. Revenue growth over the last few years has been negative at -2.22%. The key to profitability here is to make sure the company’s cost growth is well-managed. Viewing growth from a sector-level, the US internet industry has been growing, albeit, at a muted single-digit rate of 7.42% in the previous year, and a substantial 15.52% over the past five. This suggests that, although Liquidity Services is presently unprofitable, it may have gained from industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Liquidity Services’s track record can be a valuable insight into its earnings performance, but it certainly 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 useful step is to assess company-specific issues Liquidity Services may be facing and whether management guidance has regularly been met in the past. You should continue to research Liquidity Services to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for LQDT’s future growth? Take a look at our free research report of analyst consensus for LQDT’s outlook.
2. Financial Health: Is LQDT’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.