Examining Netshoes (Cayman) Limited’s (NYSE:NETS) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess NETS’s latest performance announced on 30 September 2017 and weigh these figures against its longer term trend and industry movements. Check out our latest analysis for Netshoes (Cayman)

Was NETS’s recent earnings decline worse than the long-term trend and the industry?

I like to 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 method allows me to examine different companies on a more comparable basis, using the latest information. For Netshoes (Cayman), its latest trailing-twelve-month earnings is -R$146.15M, which compared to the prior year’s figure, has become more negative. Since these figures are somewhat myopic, I have created an annualized five-year figure for NETS’s earnings, which stands at -R$131.36M. This doesn’t look much better, since earnings seem to have gradually been getting more and more negative over time.

We can further analyze Netshoes (Cayman)’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Netshoes (Cayman)’s top-line has grown by 16.25% on average, implying that the company is in a high-growth period with expenses shooting ahead of revenues, leading to annual losses. Looking at growth from a sector-level, the US online retail industry has been growing its average earnings by double-digit 26.32% over the past twelve months, and a less exciting 9.61% over the past five years. This suggests that any uplift the industry is enjoying, Netshoes (Cayman) has not been able to leverage it as much as its industry peers.

What does this mean?

Netshoes (Cayman)’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to forecast what will occur going forward, and when. The most insightful step is to assess company-specific issues Netshoes (Cayman) may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Netshoes (Cayman) to get a better picture 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.