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Was SGOCO Group Ltd’s (NASDAQ:SGOC) Earnings Decline A Part Of Broader Industry Downturn?

Kari Hurd

Analyzing SGOCO Group Ltd’s (NASDAQ:SGOC) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess SGOC’s recent performance announced on 30 June 2017 and compare these figures to its long-term trend and industry movements. Check out our latest analysis for SGOCO Group

Despite a decline, did SGOC underperform the long-term trend and the industry?

I look at 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 enables me to assess different stocks in a uniform manner using the most relevant data points. For SGOCO Group, its latest earnings (trailing twelve month) is -$4.8M, which, in comparison to the prior year’s figure, has become more negative. Given that these values are relatively short-term, I’ve created an annualized five-year value for SGOCO Group’s net income, which stands at $4.6M.

NasdaqCM:SGOC Income Statement Jan 3rd 18

We can further analyze SGOCO Group’s loss by researching what’s going on in the industry as well as within the company. Firstly, I want to quickly look into the line items. Revenue growth over the past few years has been negative at -45.31%. The key to profitability here is to make sure the company’s cost growth is well-managed. Eyeballing growth from a sector-level, the US consumer durables industry has been growing its average earnings by double-digit 11.28% over the past year, and 14.86% over the past five years. This means any tailwind the industry is profiting from, SGOCO Group has not been able to leverage it as much as its average peer.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always hard to predict what will happen in the future and when. The most useful step is to examine company-specific issues SGOCO Group may be facing and whether management guidance has dependably been met in the past. You should continue to research SGOCO Group to get a more holistic view of the stock by looking at:

1. Financial Health: Is SGOC’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. 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 June 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.