LightwaveRF Plc (LON:LWRF): Should The Recent EPS Drop Worry You?
Understanding LightwaveRF Plc’s (AIM:LWRF) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how LightwaveRF is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. View our latest analysis for LightwaveRF
Was LWRF’s recent earnings decline indicative of a tough track record?
I like to use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This allows me to analyze various companies on a more comparable basis, using the latest information. For LightwaveRF, the latest earnings -£0.8M, which compared to the prior year’s figure, has become more negative. Since these figures may be fairly short-term, I have estimated an annualized five-year figure for LightwaveRF’s net income, which stands at -£0.6M. This doesn’t look much better, as earnings seem to have consistently been getting more and more negative over time.
Additionally, we can assess LightwaveRF’s loss by looking at what has been happening in the industry as well as within the company. Firstly, I want to quickly look into the line items. Revenue growth over the past few years has increased by a mere 2.92%. Given that top-line growth is also pretty flat, the key to profitability moving forward would be managing costs. Viewing growth from a sector-level, the UK electronic equipment, instruments and components industry has been increasing average earnings growth of 60.85% in the prior year, and a strong 23.53% over the past couple of years. This suggests that whatever uplift the industry is deriving benefit from, LightwaveRF has not been able to reap as much as its industry peers.
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 forecast what will occur going forward, and when. The most insightful step is to examine company-specific issues LightwaveRF may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research LightwaveRF to get a better picture of the stock by looking at:
1. Financial Health: Is LWRF’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. 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.
