Roku Inc (NASDAQ:ROKU): Does The Earnings Decline Make It An Underperformer?
When Roku Inc (NASDAQ:ROKU) released its most recent earnings update (31 December 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Roku’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not ROKU actually performed well. Below is a quick commentary on how I see ROKU has performed. Check out our latest analysis for Roku
Commentary On ROKU’s Past Performance
For the most up-to-date info, I 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 enables me to analyze different stocks on a more comparable basis, using the latest information. For Roku, its latest earnings (trailing twelve month) is -US$63.51M, which, in comparison to the prior year’s level, has become more negative. Given that these figures may be relatively myopic, I’ve created an annualized five-year figure for Roku’s earnings, which stands at -US$46.69M. This doesn’t seem to paint a better picture, as earnings seem to have consistently been getting more and more negative over time.
We can further analyze Roku’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Roku’s top-line has risen by 21.42% on average, indicating that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Scanning growth from a sector-level, the US consumer durables industry has been growing, albeit, at a unexciting single-digit rate of 6.86% in the prior twelve months, and a substantial 15.51% over the previous five years. This means that any uplift the industry is profiting from, Roku has not been able to gain as much as its average peer.
What does this mean?
Though Roku’s past data is helpful, it is only one aspect of my investment thesis. 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 examine company-specific issues Roku may be facing and whether management guidance has steadily been met in the past. You should continue to research Roku to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ROKU’s future growth? Take a look at our free research report of analyst consensus for ROKU’s outlook.
Financial Health: Is ROKU’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 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.
