In this article, I will take a look at RAVE Restaurant Group Inc’s (NASDAQ:RAVE) most recent earnings update (24 December 2017) and compare these latest figures against its performance over the past few years, along with how the rest of RAVE’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. View our latest analysis for RAVE Restaurant Group
Could RAVE beat the long-term trend and outperform its industry?
For the purpose of this commentary, I like to use data from the most recent 12 months, 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 technique enables me to analyze many different companies in a uniform manner using the latest information. For RAVE Restaurant Group, its most recent bottom-line (trailing twelve month) is -US$3.99M, which, against the prior year’s figure, has become less negative. Given that these figures are somewhat nearsighted, I’ve calculated an annualized five-year value for RAVE Restaurant Group’s earnings, which stands at -US$3.45M. This suggests that, RAVE Restaurant Group has historically performed better than recently, although it seems like earnings are now heading back towards to right direction again.
We can further analyze RAVE Restaurant Group’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years RAVE Restaurant Group’s top-line has risen by a mere 4.59%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Eyeballing growth from a sector-level, the US hospitality industry has been growing its average earnings by double-digit 15.24% in the past year, and 11.18% over the past half a decade. This suggests that, while RAVE Restaurant Group is presently loss-making, it may have been aided by industry tailwinds, moving earnings towards to right direction.
What does this mean?
Though RAVE Restaurant Group’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to predict what will occur going forward, and when. The most insightful step is to assess company-specific issues RAVE Restaurant Group may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research RAVE Restaurant Group to get a better picture of the stock by looking at:
- 1. Financial Health: Is RAVE’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 24 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.