Measuring Torotrak plc’s (LSE:TRK) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess TRK’s recent performance announced on 31 March 2017 and compare these figures to its historical trend and industry movements. View our latest analysis for Torotrak

How Did TRK’s Recent Performance Stack Up Against Its Past?

For the purpose of this commentary, 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 blend allows me to examine different companies on a more comparable basis, using the most relevant data points. For Torotrak, its latest twelve-month earnings is -£19.7M, which, against the previous year’s level, has become more negative. Since these values are somewhat myopic, I have calculated an annualized five-year value for Torotrak’s earnings, which stands at -£6.3M. This doesn’t look much better, since earnings seem to have consistently been getting more and more negative over time.

We can further evaluate Torotrak’s loss by researching what has been happening in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last couple of years has been negative at -21.65%. The key to profitability here is to make sure the company’s cost growth is well-managed. Eyeballing growth from a sector-level, the UK auto components industry has been enduring some headwinds over the past twelve months, leading to an average earnings drop of -6.37%. This is a major change, given that the industry has been delivering a positive rate of 6.25%, on average, over the past five years. This suggests that any recent headwind the industry is experiencing, it’s hitting Torotrak harder than its peers.

What does this mean?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will happen in the future and when. The most insightful step is to examine company-specific issues Torotrak may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Torotrak to get a better picture of the stock by looking at:

1. Financial Health: Is TRK’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. 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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.