After looking at Qiwi plc’s (NASDAQ:QIWI) latest earnings announcement (30 September 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. 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 Qiwi
Was QIWI’s recent earnings decline indicative of a tough track record?
To account for any quarterly or half-yearly updates, I 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 analyze various companies in a uniform manner using the latest information. For Qiwi, its most recent earnings (trailing twelve month) is RUB2,523.0M, which compared to the prior year’s level, has sunken by a large -35.10%. Since these figures are relatively nearsighted, I have computed an annualized five-year value for Qiwi’s net income, which stands at RUB3,208.3M. This doesn’t seem to paint a better picture, since earnings seem to have consistently been diminishing over the longer term.
Why could this be happening? Let’s examine what’s going on with margins and if the rest of the industry is experiencing the hit as well. In the last few years, revenue growth has not been able to catch up, which implies that Qiwi’s bottom line has been propelled by unsustainable cost-reductions. Scanning growth from a sector-level, the US it industry has been growing, albeit, at a subdued single-digit rate of 2.96% over the past twelve months, and 9.97% over the past five. This means that whatever recent headwind the industry is facing, it’s hitting Qiwi harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that experience a drawn out period of reduction in earnings are going through some sort of reinvestment phase . However, if the whole industry is struggling to grow over time, it may be a indicator of a structural shift, which makes Qiwi and its peers a higher risk investment. I suggest you continue to research Qiwi to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for QIWI’s future growth? Take a look at our free research report of analyst consensus for QIWI’s outlook.
2. Financial Health: Is QIWI’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.