For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine LM Funding America Inc’s (NASDAQ:LMFA) 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 LM Funding America
Was LMFA’s recent earnings decline indicative of a tough track record?
I prefer to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method enables me to analyze different companies in a uniform manner using the most relevant data points. For LM Funding America, its latest earnings (trailing twelve month) is -US$6.43M, which, against last year’s figure, has become more negative. Given that these figures are somewhat nearsighted, I’ve calculated an annualized five-year value for LM Funding America’s net income, which stands at -US$1.43M. This doesn’t seem to paint a better picture, since earnings seem to have gradually been getting more and more negative over time.
We can further examine LM Funding America’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years LM Funding America has seen an annual decline in revenue of -17.58%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Viewing growth from a sector-level, the US diversified financial industry has been growing its average earnings by double-digit 20.36% in the previous twelve months, and 13.54% over the past five years. This shows that whatever uplift the industry is benefiting from, LM Funding America has not been able to leverage it as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to envisage what will occur going forward, and when. The most useful step is to assess company-specific issues LM Funding America may be facing and whether management guidance has regularly been met in the past. You should continue to research LM Funding America to get a better picture of the stock by looking at:
- 1. Financial Health: Is LMFA’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. Valuation: What is LMFA 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 LMFA is currently mispriced by the market.
- 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.