Assessing Sierra Wireless Inc’s (TSX:SW) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Sierra Wireless is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its communications industry peers. View our latest analysis for Sierra Wireless
Was SW’s recent earnings decline worse than the long-term trend and the industry?
I like 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 enables me to analyze various companies on a more comparable basis, using the most relevant data points. For Sierra Wireless, its latest earnings (trailing twelve month) is US$4.14M, which, in comparison to last year’s level, has plunged by a large -73.12%. Since these figures are somewhat short-term, I’ve created an annualized five-year figure for SW’s net income, which stands at -US$10.00M This means though earnings declined from last year, over time, Sierra Wireless’s earnings have been growing on average.
What’s enabled this growth? Let’s take a look at if it is only attributable to industry tailwinds, or if Sierra Wireless has experienced some company-specific growth. Over the last couple of years, Sierra Wireless expanded its bottom line faster than revenue by successfully controlling its costs. This resulted in a margin expansion and profitability over time. Viewing growth from a sector-level, the Canadian communications industry has been relatively flat in terms of earnings growth in the prior twelve months, evening out from a robust 28.38% over the past five years. This means whatever near-term headwind the industry is experiencing, it’s hitting Sierra Wireless harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. I suggest you continue to research Sierra Wireless to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for SW’s future growth? Take a look at our free research report of analyst consensus for SW’s outlook.
- 2. Financial Health: Is SW’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 31 December 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.