In this commentary, I will examine MYOB Group Limited’s (ASX:MYO) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the software industry performed. As an investor, I find it beneficial to assess MYO’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. See our latest analysis for MYOB Group

How Did MYO’s Recent Performance Stack Up Against Its Past?

I like to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique enables me to assess different stocks in a uniform manner using the most relevant data points. For MYOB Group, its most recent earnings (trailing twelve month) is AU$60.68M, which, in comparison to the prior year’s level, has risen by 16.33%. Given that these figures are relatively myopic, I have calculated an annualized five-year value for MYOB Group’s earnings, which stands at -AU$4.34M This means that, generally, MYOB Group has been able to increasingly improve its earnings over the past couple of years as well.

How has it been able to do this? Let’s see if it is solely because of industry tailwinds, or if MYOB Group has seen some company-specific growth. Over the past few years, MYOB Group expanded its bottom line faster than revenue by effectively controlling its costs. This has caused a margin expansion and profitability over time. Looking at growth from a sector-level, the Australian software industry has been growing its average earnings by double-digit 13.93% in the past year, and 15.93% over the previous five years. This shows that whatever uplift the industry is enjoying, MYOB Group is able to leverage this to its advantage.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as MYOB Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research MYOB Group to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for MYO’s future growth? Take a look at our free research report of analyst consensus for MYO’s outlook.

2. Financial Health: Is MYO’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.