Examining Warpaint London PLC’s (AIM:W7L) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess W7L’s latest performance announced on 30 June 2017 and weigh these figures against its longer term trend and industry movements. See our latest analysis for Warpaint London
Commentary On W7L’s Past Performance
I like to 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 method enables me to assess different stocks on a similar basis, using the most relevant data points. “For Warpaint London, its “, most recent bottom-line is £3.2M, which, against the prior year’s figure, has sunken by a non-trivial -31.87%. Since these values may be fairly nearsighted, I have determined an annualized five-year value for Warpaint London’s net income, which stands at £3.9M. This doesn’t look much better, as earnings seem to have steadily been declining over the longer term.
What could be happening here? Well, let’s take a look at what’s occurring with margins and whether the entire industry is experiencing the hit as well. Revenue growth in the past few years, has been positive, nevertheless earnings growth has been deteriorating. This implies that Warpaint London has been increasing expenses, which is hurting margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the UK personal products industry has been growing its average earnings by double-digit 17.37% over the past twelve months, and 18.50% over the previous few years. This suggests that any uplift the industry is enjoying, Warpaint London has not been able to leverage it as much as its industry peers.
What does this mean?
Warpaint London’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Typically companies that experience a drawn out period of decline in earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry expansion and disruption. You should continue to research Warpaint London to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for W7L’s future growth? Take a look at our free research report of analyst consensus for W7L’s outlook.
2. Financial Health: Is W7L’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 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.