When Lycopodium Limited (ASX:LYL) released its most recent earnings update (30 December 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Lycopodium’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not LYL actually performed well. Below is a quick commentary on how I see LYL has performed. Check out our latest analysis for Lycopodium

How LYL fared against its long-term earnings performance and its industry

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 method allows me to analyze many different companies in a uniform manner using the most relevant data points. For Lycopodium, its latest trailing-twelve-month earnings is AU$12.20M, which, in comparison to the prior year’s level, has moved up by a non-trivial 55.37%. Since these figures are somewhat short-term, I have created an annualized five-year value for LYL’s earnings, which stands at AU$11.16M This means on average, Lycopodium has been able to steadily raise its net income over the last couple of years as well.

What’s enabled this growth? Well, let’s take a look at whether it is only a result of an industry uplift, or if Lycopodium has experienced some company-specific growth. Though both top-line and bottom-line growth rates in the past couple of years, were, on average, negative, earnings were more so. While this has led to a margin contraction, it has lessened Lycopodium’s earnings contraction. Scanning growth from a sector-level, the Australian construction industry has been growing, albeit, at a subdued single-digit rate of 9.98% over the prior twelve months, . This is a change from a volatile drop of -7.80% in the past couple of years. This means that, in the recent industry expansion, Lycopodium is capable of leveraging this to its advantage.

What does this mean?

Though Lycopodium’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Lycopodium gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Lycopodium to get a more holistic view of the stock by looking at:

• 1. Financial Health: Is LYL’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. Valuation: What is LYL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether LYL is currently mispriced by the market.

• 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 30 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.