Should Network-1 Technologies Inc’s (NYSEMKT:NTIP) Recent Earnings Decline Worry You?
When Network-1 Technologies Inc’s (NYSEMKT:NTIP) announced its latest earnings (31 March 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Network-1 Technologies’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not NTIP actually performed well. Below is a quick commentary on how I see NTIP has performed. Check out our latest analysis for Network-1 Technologies
Was NTIP’s weak performance lately a part of a long-term decline?
NTIP’s trailing twelve-month earnings (from 31 March 2018) of US$10.47m has more than halved from US$23.22m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 10.49%, indicating the rate at which NTIP is growing has slowed down. Why is this? Well, let’s look at what’s occurring with margins and if the entire industry is facing the same headwind.
Revenue growth in the last few years, has been positive, however, earnings growth has failed to keep up meaning Network-1 Technologies has been ramping up its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the US communications industry has been growing its average earnings by double-digit 13.80% over the previous year, and a less exciting 6.43% over the last five years. This suggests that any tailwind the industry is deriving benefit from, Network-1 Technologies has not been able to reap as much as its industry peers.
In terms of returns from investment, Network-1 Technologies has not invested its equity funds well, leading to a 16.99% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 14.00% exceeds the US Communications industry of 4.37%, indicating Network-1 Technologies has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Network-1 Technologies’s debt level, has increased over the past 3 years from 29.70% to 30.51%.
What does this mean?
Network-1 Technologies’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. You should continue to research Network-1 Technologies to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for NTIP’s future growth? Take a look at our free research report of analyst consensus for NTIP’s outlook.
Financial Health: Is NTIP’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.
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 March 2018. 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.
