How Has Instructure, Inc.’s (NYSE:INST) Earnings Fared Against The Long Term Trend
In this commentary, I will examine Instructure, Inc.’s (NYSE:INST) latest earnings update (31 December 2018) and compare these figures against its performance over the past couple of years, as well as how the rest of the software industry performed. As an investor, I find it beneficial to assess INST’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
View our latest analysis for Instructure
Have INST’s earnings improved against past performances and the industry?
INST is loss-making, with the most recent trailing twelve-month earnings of -US$43.5m (from 31 December 2018), which compared to last year has become more negative. However, the company’s loss seem to be contracting over the medium term, with the five-year earnings average of -US$48.6m. Each year, for the past five years INST has seen an annual increase in operating expense growth, outpacing revenue growth of 35%, on average. This adverse movement is a driver of the company’s inability to reach breakeven.
Looking at growth from a sector-level, the US software industry has been growing its average earnings by double-digit 22% in the previous twelve months,
Given that Instructure is currently unprofitable, with operating expenses (opex) growing year-on-year at 25%, it may need to raise more cash over the next year. It currently has US$153m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached US$195m in the latest twelve months. Even though this is analysis is fairly basic, and Instructure still can cut its overhead in the near future, or open a new line of credit instead of issuing new equity shares, the analysis still helps us understand how sustainable the Instructure’s operation is, and when things may have to change.
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 valuable step is to assess company-specific issues Instructure may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Instructure to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for INST’s future growth? Take a look at our free research report of analyst consensus for INST’s outlook.
Financial Health: Are INST’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.
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 2018. This may not be consistent with full year annual report figures.
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