Water Intelligence plc (LON:WATR): Should The Recent Earnings Drop Worry You?
Today I will take a look at Water Intelligence plc’s (AIM:WATR) most recent earnings update (30 June 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the industry industry performed. As an investor, I find it beneficial to assess WATR’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. View our latest analysis for Water Intelligence
How Did WATR’s Recent Performance Stack Up Against Its Past?
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 technique enables me to assess many different companies on a similar basis, using new information. For Water Intelligence, its latest trailing-twelve-month earnings is $0.4M, which, against the prior year’s level, has fallen by a large -30.70%. Given that these figures may be relatively nearsighted, I have created an annualized five-year value for WATR’s net income, which stands at $0.2M. This means although earnings growth was negative from the previous year, over the longer term, Water Intelligence’s profits have been increasing on average.
What’s the driver of this growth? Let’s take a look at if it is solely a result of an industry uplift, or if Water Intelligence has experienced some company-specific growth. Over the past few years, Water Intelligence increased its bottom line faster than revenue by successfully controlling its costs. This has caused a margin expansion and profitability over time. Eyeballing growth from a sector-level, the UK industry industry has been growing, albeit, at a muted single-digit rate of 5.74% over the previous year, and 4.66% over the previous few years. This suggests that whatever tailwind the industry is enjoying, Water Intelligence has not been able to gain as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies are profitable, but have volatile earnings, can have many factors affecting its business. I recommend you continue to research Water Intelligence to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for WATR’s future growth? Take a look at our free research report of analyst consensus for WATR’s outlook.
2. Financial Health: Is WATR’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 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.
