When Marchex Inc’s (NASDAQ:MCHX) announced its latest earnings (30 September 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Marchex’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not MCHX actually performed well. Below is a quick commentary on how I see MCHX has performed. See our latest analysis for MCHX
How Did MCHX’s Recent Performance Stack Up Against Its Past?
To account for any quarterly or half-yearly updates, I 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 blend enables me to assess different stocks in a uniform manner using the most relevant data points. Marchex’s latest twelve-month earnings -$11.3M, which compared to the previous year’s level, has become less negative. Since these figures may be relatively short-term, I have estimated an annualized five-year value for Marchex’s earnings, which stands at -$20.7M. This means that, even though net income is negative, it has become less negative over the years.
Additionally, we can analyze Marchex’s loss by looking at what has been happening in the industry on top of within the company. First, I want to quickly look into the line items. Revenue growth over last few years has been somewhat unexciting, remaining flat on average at 0.23%. Given that top-line growth is also pretty stale the key to profitability moving forward would be controlling costs. Looking at growth from a sector-level, the US internet software and services industry has been growing its average earnings by double-digit 15.49% over the past twelve months, and 19.30% over the past five. This means despite the fact that Marchex is presently unprofitable, it may have gained from industry tailwinds, moving earnings in the right direction.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always hard to predict what will happen in the future and when. The most useful step is to assess company-specific issues Marchex may be facing and whether management guidance has dependably been met in the past. You should continue to research Marchex to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for MCHX’s future growth? Take a look at our free research report of analyst consensus for MCHX’s outlook.
2. Financial Health: Is MCHX’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.