Advertisement
U.S. markets open in 7 hours 34 minutes
  • S&P Futures

    5,209.75
    -5.00 (-0.10%)
     
  • Dow Futures

    39,215.00
    -8.00 (-0.02%)
     
  • Nasdaq Futures

    18,193.25
    -38.25 (-0.21%)
     
  • Russell 2000 Futures

    2,048.20
    -1.60 (-0.08%)
     
  • Crude Oil

    82.49
    -0.23 (-0.28%)
     
  • Gold

    2,161.80
    -2.50 (-0.12%)
     
  • Silver

    25.18
    -0.08 (-0.32%)
     
  • EUR/USD

    1.0867
    -0.0009 (-0.09%)
     
  • 10-Yr Bond

    4.3400
    0.0000 (0.00%)
     
  • Vix

    14.33
    -0.08 (-0.56%)
     
  • GBP/USD

    1.2709
    -0.0020 (-0.15%)
     
  • USD/JPY

    150.3410
    +1.2430 (+0.83%)
     
  • Bitcoin USD

    64,988.10
    -3,729.86 (-5.43%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,722.55
    -4.87 (-0.06%)
     
  • Nikkei 225

    39,905.21
    +164.81 (+0.41%)
     

Has Frontier Developments Plc (LON:FDEV) Improved Earnings Growth In Recent Times?

After reading Frontier Developments Plc’s (AIM:FDEV) latest earnings update (30 November 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether FDEV has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. View our latest analysis for Frontier Developments

Did FDEV beat its long-term earnings growth trend and its industry?

I like to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to assess many different companies on a more comparable basis, using new information. For Frontier Developments, its latest trailing-twelve-month earnings is UK£7.02M, which compared to last year’s level, has moved up by a non-trivial 50.16%. Given that these figures may be fairly nearsighted, I have calculated an annualized five-year figure for Frontier Developments’s earnings, which stands at UK£1.88M This means on average, Frontier Developments has been able to gradually improve its earnings over the past couple of years as well.

AIM:FDEV Income Statement Mar 2nd 18
AIM:FDEV Income Statement Mar 2nd 18

What’s enabled this growth? Let’s take a look at whether it is only owing to industry tailwinds, or if Frontier Developments has experienced some company-specific growth. Over the last few years, Frontier Developments grew its bottom line faster than revenue by efficiently controlling its costs. This brought about a margin expansion and profitability over time. Inspecting growth from a sector-level, the UK software industry has been growing, albeit, at a unexciting single-digit rate of 9.93% in the previous twelve months, and 4.77% over the past five. This shows that whatever tailwind the industry is profiting from, Frontier Developments is capable of leveraging this to its advantage.

What does this mean?

Though Frontier Developments’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Frontier Developments to get a better picture of the stock by looking at:

  • 1. Future Outlook: What are well-informed industry analysts predicting for FDEV’s future growth? Take a look at our free research report of analyst consensus for FDEV’s outlook.

  • 2. Financial Health: Is FDEV’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.

  • 3. 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 30 November 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.

Advertisement