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In this article, I will take a look at Rectifier Technologies Limited’s (ASX:RFT) most recent earnings update (31 December 2017) and compare these latest figures against its performance over the past few years, along with how the rest of RFT’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. Check out our latest analysis for Rectifier Technologies
Was RFT’s weak performance lately a part of a long-term decline?
I use the ‘latest twelve-month’ data, 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 allows me to assess different stocks in a uniform manner using the most relevant data points. For Rectifier Technologies, its most recent earnings (trailing twelve month) is AU$728.34K, which compared to the prior year’s figure, has plunged by a significant -31.82%. Given that these values may be fairly nearsighted, I have estimated an annualized five-year figure for RFT’s net income, which stands at AU$315.73K This means that despite the fact that earnings growth was negative against the previous year, over the past couple of years, Rectifier Technologies’s earnings have been increasing on average.
What’s enabled this growth? Let’s see if it is solely a result of industry tailwinds, or if Rectifier Technologies has seen some company-specific growth. In the past couple of years, Rectifier Technologies grew bottom-line, while its top-line fell, by successfully managing its costs. This resulted in to a margin expansion and profitability over time. Looking at growth from a sector-level, the Australian electrical industry has been enduring some headwinds over the past year, leading to an average earnings drop of -3.23%. This is a significant change, given that the industry has been delivering a positive rate of 5.21%, on average, over the past half a decade. This means that whatever near-term headwind the industry is enduring, it’s hitting Rectifier Technologies harder than its peers.
What does this mean?
Though Rectifier Technologies’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. You should continue to research Rectifier Technologies to get a better picture of the stock by looking at: