When Versarien plc (AIM:VRS) released its most recent earnings update (30 September 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Versarien has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see VRS has performed. View our latest analysis for Versarien

Commentary On VRS’s Past Performance

I prefer to use the ‘latest twelve-month’ data, 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 allows me to examine many different companies in a uniform manner using new information. For Versarien, its most recent bottom-line (trailing twelve month) is -UK£1.41M, which, against last year’s level, has become less negative. Since these figures are fairly short-term thinking, I have determined an annualized five-year figure for Versarien’s net income, which stands at -UK£1.17M. This means that, Versarien has historically performed better than recently, even though it seems like earnings are now heading back in the right direction again.

We can further evaluate Versarien’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Versarien’s top-line has increased by 28.59% on average, implying that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Inspecting growth from a sector-level, the UK chemicals industry has been growing its average earnings by double-digit 38.18% in the prior year, and a more muted 2.70% over the previous five years. This suggests that, though Versarien is currently running a loss, it may have gained from industry tailwinds, moving earnings towards to right direction.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to envisage what will happen in the future and when. The most insightful step is to assess company-specific issues Versarien may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Versarien to get a better picture of the stock by looking at:

• 1. Financial Health: Is VRS’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.

• 2. 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.