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When SPS Commerce Inc’s (NASDAQ:SPSC) announced its latest earnings (31 December 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were SPS Commerce’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not SPSC actually performed well. Below is a quick commentary on how I see SPSC has performed. View our latest analysis for SPS Commerce
How Well Did SPSC Perform?
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 many different companies on a more comparable basis, using new information. For SPS Commerce, its most recent bottom-line (trailing twelve month) is -US$2.44M, which, relative to the previous year’s level, has turned from positive to negative. Since these values are relatively myopic, I’ve calculated an annualized five-year figure for SPS Commerce’s net income, which stands at US$4.71M.
We can further assess SPS Commerce’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years SPS Commerce’s top-line has increased by 21.44% on average, signalling that the company is in a high-growth phase with expenses racing ahead revenues, leading to annual losses. Inspecting growth from a sector-level, the US internet industry has been growing its average earnings by double-digit 14.06% in the past twelve months, and 17.62% over the past half a decade. This suggests that whatever tailwind the industry is enjoying, SPS Commerce has not been able to reap as much as its industry peers.
What does this mean?
SPS Commerce’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to envisage what will occur going forward, and when. The most insightful step is to assess company-specific issues SPS Commerce may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research SPS Commerce to get a more holistic view of the stock by looking at:
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1. Future Outlook: What are well-informed industry analysts predicting for SPSC’s future growth? Take a look at our free research report of analyst consensus for SPSC’s outlook.
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2. Financial Health: Is SPSC’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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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 31 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.