After looking at Sonic Foundry Inc’s (NASDAQ:SOFO) latest earnings announcement (31 March 2018), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Sonic Foundry’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for Sonic Foundry
How Did SOFO’s Recent Performance Stack Up Against Its Past?
To account for any quarterly or half-yearly updates, I 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 allows me to assess many different companies on a similar basis, using new information. For Sonic Foundry, its latest earnings (trailing twelve month) is -US$3.49M, which, relative to last year’s figure, has become less negative. Given that these figures are somewhat short-term thinking, I have computed an annualized five-year figure for SOFO’s earnings, which stands at -US$2.37M. This means that, Sonic Foundry has historically performed better than recently, despite the fact that it seems like earnings are now heading back towards to right direction again.
We can further analyze Sonic Foundry’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Sonic Foundry’s top-line has risen by a mere 6.96%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Viewing growth from a sector-level, the US software industry has been growing its average earnings by double-digit 12.76% in the previous year, and 12.89% over the previous five years. This shows that, despite the fact that Sonic Foundry is currently unprofitable, it may have benefited from industry tailwinds, moving earnings towards to 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 envisage what will occur going forward, and when. The most useful step is to examine company-specific issues Sonic Foundry may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Sonic Foundry to get a more holistic view of the stock by looking at:
- Financial Health: Is SOFO’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.
- Valuation: What is SOFO worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SOFO is currently mispriced by the market.
- 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 March 2018. 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.