Does Real Goods Solar Inc’s (NASDAQ:RGSE) Past Performance Indicate A Stronger Future?
Today I will examine Real Goods Solar Inc’s (NASDAQ:RGSE) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of RGSE’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. Check out our latest analysis for Real Goods Solar
Were RGSE’s earnings stronger than its past performances and the industry?
I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend allows me to analyze many different companies in a uniform manner using the most relevant data points. For Real Goods Solar, its most recent earnings (trailing twelve month) is -US$18.07M, which, in comparison to last year’s level, has become less negative. Given that these figures are somewhat short-term thinking, I have estimated an annualized five-year figure for RGSE’s net income, which stands at -US$19.82M. This means that, although net income is negative, it has become less negative over the years.
We can further analyze Real Goods Solar’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Real Goods Solar has seen an annual decline in revenue of -23.86%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Scanning growth from a sector-level, the US electrical industry has been growing, albeit, at a muted single-digit rate of 6.54% in the prior twelve months, and a substantial 11.14% over the past half a decade. This suggests that, despite the fact that Real Goods Solar is presently unprofitable, it may have gained from industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Real Goods Solar’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 hard to forecast what will happen in the future and when. The most insightful step is to assess company-specific issues Real Goods Solar may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Real Goods Solar to get a more holistic view of the stock by looking at:
1. Financial Health: Is RGSE’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 trailing twelve months from 31 December 2017. 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.
