Understanding how Polar Power Inc (NASDAQ:POLA) is performing as a company requires looking at more than just a years’ earnings. Today I will run you through a basic sense check to gain perspective on how Polar Power is doing by comparing its latest earnings with its long-term trend as well as the performance of its electrical industry peers. See our latest analysis for Polar Power
Was POLA’s weak performance lately a part of a long-term decline?
For the purpose of this commentary, I like to 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 technique enables me to analyze many different companies in a uniform manner using the latest information. “For Polar Power, its “, most recent bottom-line is $1.5M, which compared to last year’s figure, has plunged by a substantial -40.00%. Since these figures are fairly nearsighted, I have created an annualized five-year figure for POLA’s net income, which stands at $2.1M. This doesn’t seem to paint a better picture, since earnings seem to have consistently been declining over the longer term.
What could be happening here? Well, let’s take a look at what’s transpiring with margins and whether the rest of the industry is experiencing the hit as well. Over the past couple of years, revenue growth has failed to keep up which indicates that Polar Power’s bottom line has been driven by unsustainable cost-reductions. Eyeballing growth from a sector-level, the US electrical industry has been growing its average earnings by double-digit 24.45% over the past year, and a more subdued 4.93% over the past five. This shows that whatever tailwind the industry is profiting from, Polar Power has not been able to leverage it as much as its industry peers.
What does this mean?
Polar Power’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. In some cases, companies that experience a drawn out period of reduction in earnings are going through some sort of reinvestment phase in order to keep up with the latest industry expansion and disruption. I suggest you continue to research Polar Power to get a better picture of the stock by looking at:
1. Financial Health: Is POLA’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. 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.