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For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Morion Inc (MISX:MORI) useful as an attempt to give more color around how Morion is currently performing. See our latest analysis for Morion
Despite a decline, did MORI underperform the long-term trend and the industry?
I prefer to use data from the most recent 12 months, 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 examine various companies on a more comparable basis, using the most relevant data points. For Morion, its most recent bottom-line (trailing twelve month) is RUРУБ47.64M, which compared to the previous year’s figure, has dropped by a significant -57.63%. Given that these values may be somewhat nearsighted, I’ve created an annualized five-year value for MORI’s earnings, which stands at RUРУБ83.77M This doesn’t look much better, as earnings seem to have steadily been falling over the longer term.
Why is this? Well, let’s look at what’s occurring with margins and if the rest of the industry is experiencing the hit as well. Revenue growth over the past couple of years, has been positive, however, earnings growth has fallen behind meaning Morion has been ramping up its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the RU communications industry has been growing its average earnings by double-digit 27.41% over the previous twelve months, and 15.88% over the past five years. This means whatever uplift the industry is benefiting from, Morion has not been able to realize the gains unlike its average peer.
What does this mean?
Though Morion’s past data is helpful, it is only one aspect of my investment thesis. Usually companies that face a prolonged period of decline in earnings are going through some sort of reinvestment phase with the aim of keeping up with the latest industry growth and disruption. You should continue to research Morion to get a better picture of the stock by looking at:
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Financial Health: Is MORI’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.
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Valuation: What is MORI 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 MORI is currently mispriced by the market.
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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 June 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.