Where Five9 Inc (NASDAQ:FIVN) Stands In Terms Of Earnings Growth Against Its Industry
After reading Five9 Inc’s (NASDAQ:FIVN) 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. Check out our latest analysis for Five9
Did FIVN beat its long-term earnings growth trend and its industry?
I prefer 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 examine various companies on a more comparable basis, using new information. For Five9, its most recent earnings (trailing twelve month) is -US$7.93M, which compared to the previous year’s level, has become less negative. Given that these figures may be fairly short-term thinking, I’ve calculated an annualized five-year figure for Five9’s earnings, which stands at -US$24.29M. This suggests that, even though net income is negative, it has become less negative over the years.
We can further evaluate Five9’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Five9’s top-line has grown by 21.26% on average, indicating that the company is in a high-growth phase with expenses shooting ahead of revenues, leading to annual losses. Scanning growth from a sector-level, the US internet industry has been growing its average earnings by double-digit 15.44% over the past twelve months, and 18.62% over the last five years. This shows that, while Five9 is presently loss-making, it may have been aided by industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Though Five9’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 forecast what will happen in the future and when. The most valuable step is to assess company-specific issues Five9 may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Five9 to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for FIVN’s future growth? Take a look at our free research report of analyst consensus for FIVN’s outlook.
2. Financial Health: Is FIVN’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 September 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.
