MEGARON Spólka Akcyjna (WSE:MEG): Does The Earnings Decline Make It An Underperformer?
After looking at MEGARON Spólka Akcyjna’s (WSE:MEG) latest earnings update (30 September 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. See our latest analysis for MEGARON Spólka Akcyjna
Did MEG perform worse than its track record and industry?
I prefer to 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 technique enables me to examine different stocks on a more comparable basis, using the most relevant data points. For MEGARON Spólka Akcyjna, its latest trailing-twelve-month earnings is -ZŁ748.00K, which, against the prior year’s figure, has turned from positive to negative. Given that these figures may be somewhat myopic, I’ve created an annualized five-year figure for MEG’s net income, which stands at ZŁ3.63M.
We can further assess MEGARON Spólka Akcyjna’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years MEGARON Spólka Akcyjna’s revenue growth has been relatively subdued, with an annual growth rate of 0.29%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Looking at growth from a sector-level, the PL basic materials industry has been enduring severe headwinds over the past twelve months, leading to an average earnings drop of -39.66%. This is a significant change, given that the industry has constantly been delivering a a robust growth of 24.05% in the past five years. This means that any near-term headwind the industry is facing, it’s hitting MEGARON Spólka Akcyjna harder than its peers.
What does this mean?
MEGARON Spólka Akcyjna’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to predict what will occur going forward, and when. The most insightful step is to examine company-specific issues MEGARON Spólka Akcyjna may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research MEGARON Spólka Akcyjna to get a more holistic view of the stock by looking at:
1. Financial Health: Is MEG’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 MEG 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 MEG 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.
