For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Echelon Corporation’s (NASDAQ:ELON) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers. See our latest analysis for ELON
Were ELON’s earnings stronger than its past performances and the industry?
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 enables me to examine many different companies on a similar basis, using the most relevant data points. For Echelon, the most recent twelve-month earnings -$5M, which, relative to last year’s figure, has become less negative. Since these values are somewhat short-term, I’ve determined an annualized five-year figure for ELON’s earnings, which stands at -$13M. This shows that, even though net income is negative, it has become less negative over the years.
Additionally, we can examine Echelon’s loss by researching what’s going on in the industry as well as within the company. Initially, I want to briefly look into the line items. Revenue growth over last couple of years has been negative at -27.91%. The key to profitability here is to make sure the company’s cost growth is well-managed. Scanning growth from a sector-level, the US electronic equipment, instruments and components industry has been growing its average earnings by double-digit 24.07% in the past year, and a less exciting 5.69% over the past five years. This suggests that, although Echelon is presently running a loss, it may have gained from industry tailwinds, moving earnings in the right direction.
What does this mean?
Echelon’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 difficult to predict what will occur going forward, and when. The most valuable step is to assess company-specific issues Echelon may be facing and whether management guidance has consistently been met in the past. You should continue to research Echelon to get a better picture of the stock by looking at:
1. Financial Health: Is ELON’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.