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Interested In Changyoucom Limited (NASDAQ:CYOU)? Here’s How It’s Performing

After reading Changyoucom Limited’s (NASDAQ:CYOU) latest earnings update (30 September 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 CYOU 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 Changyou.com

How Did CYOU’s Recent Performance Stack Up Against Its Past?

To account for any quarterly or half-yearly updates, I 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 technique allows me to examine different stocks in a uniform manner using new information. For Changyou.com, its most recent trailing-twelve-month earnings is $115.6M, which compared to last year’s figure, has plunged by -18.78%. Given that these figures are fairly short-term, I’ve estimated an annualized five-year figure for Changyou.com’s net income, which stands at $188.9M. This doesn’t look much better, as earnings seem to have steadily been declining over time.

NasdaqGS:CYOU Income Statement Jan 29th 18
NasdaqGS:CYOU Income Statement Jan 29th 18

Why could this be happening? Let’s examine what’s transpiring with margins and whether the rest of the industry is experiencing the hit as well. Revenue growth over the last few years, has been positive, nevertheless earnings growth has been falling. This suggest that Changyou.com has been ramping up expenses, which is hurting margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the US software industry has been growing its average earnings by double-digit 16.28% over the past year, and 10.69% over the previous five years. This suggests that whatever tailwind the industry is profiting from, Changyou.com has not been able to gain as much as its average peer.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Usually companies that experience a prolonged period of decline in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the latest industry disruption and growth. I recommend you continue to research Changyou.com to get a better picture of the stock by looking at:

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

  • 2. Financial Health: Is CYOU’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 September 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.

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