In this commentary, I will examine AstiVita Limited’s (ASX:AIR) latest earnings update (30 June 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the trade distributors industry performed. As an investor, I find it beneficial to assess AIR’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. Check out our latest analysis for AstiVita

Were AIR’s earnings stronger than its past performances and the industry?

For the purpose of this commentary, I like to use data from the most recent 12 months, 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 technique allows me to analyze many different companies on a more comparable basis, using the latest information. For AstiVita, its latest trailing-twelve-month earnings is -A$1.0M, which compared to last year’s figure, has become less negative. Since these figures are relatively nearsighted, I have calculated an annualized five-year value for AstiVita’s earnings, which stands at -A$0.9M. This shows that, AstiVita has historically performed better than recently, despite the fact that it seems like earnings are now heading back in the right direction again.

Additionally, we can analyze AstiVita’s loss by researching what’s going on in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over the last couple of years has been negative at -36.28%. The key to profitability here is to make sure the company’s cost growth is well-managed. Looking at growth from a sector-level, the Australian trade distributors industry has been enduring some headwinds in the previous year, leading to an average earnings drop of -4.58%. This is a momentous change, given that the industry has constantly been delivering a a notable growth of 11.19% in the past couple of years. This suggests that even though AstiVita is presently running a loss, any recent headwind the industry is facing, AstiVita is less exposed compared to its peers.

What does this mean?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to envisage what will occur going forward, and when. The most useful step is to examine company-specific issues AstiVita may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research AstiVita to get a more holistic view of the stock by looking at: