After reading Sunworks Inc’s (NASDAQ:SUNW) 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 SUNW 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 Sunworks
Was SUNW weak performance lately part of a long-term decline?
I use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method enables me to analyze different companies in a uniform manner using new information. Sunworks’s most recent bottom-line -$7M, which, relative to the previous year’s level, has become more negative. Given that these figures may be relatively short-term, I have calculated an annualized five-year figure for SUNW’s earnings, which stands at -$6M. This doesn’t seem to paint a better picture, as earnings seem to have consistently been getting more and more negative over time.
We can further examine Sunworks’s loss by looking at 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 past few years has grew by 52.69%, indicating that Sunworks is in a high-growth phase with expenses shooting ahead of high top-line growth rates. Eyeballing growth from a sector-level, the US electrical equipment industry has been growing its average earnings by double-digit 11.81% over the prior year, and a less exciting 6.05% over the past five years. This means that whatever uplift the industry is profiting from, Sunworks has not been able to realize the gains unlike its industry peers.
What does this mean?
Though Sunworks’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to envisage what will occur going forward, and when. The most useful step is to examine company-specific issues Sunworks may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Sunworks to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for SUNW’s future growth? Take a look at our free research report of analyst consensus for SUNW’s outlook.
2. Financial Health: Is SUNW’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 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.