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 Etherstack plc’s (ASX:ESK) 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 Etherstack

Commentary On ESK’s Past Performance

I prefer 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 enables me to assess different stocks on a more comparable basis, using the latest information. For Etherstack, its most recent trailing-twelve-month earnings is -US$1.55M, which, against the prior year’s level, has become less negative. Given that these figures may be fairly short-term thinking, I’ve created an annualized five-year figure for ESK’s earnings, which stands at -US$2.69M. This shows that, even though net income is negative, it has become less negative over the years.

We can further assess Etherstack’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Etherstack has seen an annual decline in revenue of -15.56%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Viewing growth from a sector-level, the Australian software industry has been growing its average earnings by double-digit 13.49% in the prior year, and 13.98% over the past five. This suggests that any uplift the industry is benefiting from, Etherstack has not been able to realize the gains unlike its average peer.

What does this mean?

Though Etherstack’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to envisage what will happen in the future and when. The most useful step is to assess company-specific issues Etherstack may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Etherstack to get a more holistic view of the stock by looking at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.