For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at V1 Group Limited’s (SEHK:82) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. View our latest analysis for V1 Group
Was 82 weak performance lately part of a long-term decline?
For the most up-to-date info, I 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 blend allows me to assess different companies on a more comparable basis, using new information. For V1 Group, its latest earnings is -HK$971.3M, which, relative to last year’s figure, has become more negative. Given that these values are relatively nearsighted, I have calculated an annualized five-year value for V1 Group’s earnings, which stands at -HK$209.0M. This doesn’t seem to paint a better picture, since earnings seem to have consistently been getting more and more negative over time.
We can further examine V1 Group’s loss by researching what has been happening in the industry as well as within the company. First, I want to briefly look into the line items. Revenue growth over the past few years has been negative at -26.95%. The key to profitability here is to make sure the company’s cost growth is well-managed. Scanning growth from a sector-level, the HK software industry has been growing, albeit, at a muted single-digit rate of 8.89% over the prior year, and 6.98% over the past five years. This suggests that whatever tailwind the industry is benefiting from, V1 Group has not been able to realize the gains unlike its average peer.
What does this mean?
V1 Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to predict what will happen in the future and when. The most useful step is to assess company-specific issues V1 Group may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research V1 Group to get a better picture of the stock by looking at:
1. Financial Health: Is 82’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.