When National Instruments Corporation (NASDAQ:NATI) released its most recent earnings update (31 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how National Instruments performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see NATI has performed. See our latest analysis for National Instruments
Was NATI weak performance lately part of a long-term decline?
I use data from the most recent 12 months, 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 many different companies in a uniform manner using new information. For National Instruments, its most recent trailing-twelve-month earnings is US$52.41M, which, against the prior year’s level, has fallen by a large -36.65%. Given that these values may be somewhat nearsighted, I have estimated an annualized five-year value for NATI’s net income, which stands at US$95.06M This doesn’t seem to paint a better picture, since earnings seem to have steadily been diminishing over the longer term.
Why could this be happening? Well, let’s take a look at what’s occurring with margins and whether the whole industry is experiencing the hit as well. Revenue growth over the last few years, has been positive, yet earnings growth has been deteriorating. This suggest that National Instruments has been increasing expenses, which is hurting margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the US electronic industry has been growing its average earnings by double-digit 16.29% over the past year, and 10.18% over the past five years. This shows that any uplift the industry is enjoying, National Instruments has not been able to reap as much as its average peer.
What does this mean?
Though National Instruments’s past data is helpful, it is only one aspect of my investment thesis. In some cases, companies that experience a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. You should continue to research National Instruments to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for NATI’s future growth? Take a look at our free research report of analyst consensus for NATI’s outlook.
- 2. Financial Health: Is NATI’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 trailing twelve months from 31 December 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.