After reading MagnaChip Semiconductor Corporation’s (NYSE:MX) most recent earnings announcement (30 September 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether MagnaChip Semiconductor’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. Check out our latest analysis for MagnaChip Semiconductor
Despite a decline, did MX underperform the long-term trend and the industry?
I prefer to 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 blend enables me to examine different companies in a uniform manner using the most relevant data points. MagnaChip Semiconductor’s latest earnings -$8.5M, which, against the previous year’s figure, has turned from positive to negative. Since these values may be relatively nearsighted, I have computed an annualized five-year figure for MX’s net income, which stands at -$13.1M. This suggests that, though net income is negative, it has become less negative over the years.
Additionally, we can analyze MagnaChip Semiconductor’s loss by researching what’s going on in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over last couple of years has been negative at -3.09%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Looking at growth from a sector-level, the US semiconductors and semiconductor equipment industry has been growing its average earnings by double-digit 35.14% over the past twelve months, and a less exciting 5.60% over the past five. This means whatever uplift the industry is enjoying, MagnaChip Semiconductor has not been able to reap 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 predict what will occur going forward, and when. The most insightful step is to assess company-specific issues MagnaChip Semiconductor may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research MagnaChip Semiconductor to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for MX’s future growth? Take a look at our free research report of analyst consensus for MX’s outlook.
2. Financial Health: Is MX’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.