After reading LM Funding America Inc’s (NASDAQ:LMFA) most recent earnings announcement (30 September 2017), I found it useful to look back at how the company has performed in the past 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 a crucial aspect. Below is a brief commentary on my key takeaways. View our latest analysis for LM Funding America
Despite a decline, did LMFA underperform the long-term trend and the industry?
I prefer to use the ‘latest twelve-month’ data, 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 allows me to analyze different companies on a more comparable basis, using new information. LM Funding America’s most recent earnings -$6.4M, which compared to the previous year’s figure, has become more negative. Since these values are fairly short-term thinking, I’ve computed an annualized five-year figure for LMFA’s net income, which stands at -$1.4M. This doesn’t seem to paint a better picture, as earnings seem to have consistently been getting more and more negative over time.
Additionally, we can assess LM Funding America’s loss by researching what’s going on in the industry on top of within the company. Firstly, I want to quickly look into the line items. Revenue growth over the past couple of years has been negative at -17.58%. The key to profitability here is to make sure the company’s cost growth is well-managed. Looking at growth from a sector-level, the US diversified financial services industry has been growing its average earnings by double-digit 23.27% over the previous year, and 13.50% over the previous five years. This suggests that whatever tailwind the industry is enjoying, LM Funding America has not been able to gain as much as its industry peers.
What does this mean?
LM Funding America’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 hard to forecast what will happen in the future and when. The most valuable step is to examine company-specific issues LM Funding America may be facing and whether management guidance has regularly been met in the past. You should continue to research LM Funding America to get a better picture of the stock by looking at:
1. Financial Health: Is LMFA’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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.