In this commentary, I will examine Vianini Sp.A.’s (BIT:VIA) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the basic materials industry performed. As an investor, I find it beneficial to assess VIA’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for Vianini

Was VIA’s weak performance lately a part of a long-term decline?

I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This blend enables me to assess various companies in a uniform manner using new information. For Vianini, its most recent earnings (trailing twelve month) is €1.88M, which compared to the previous year’s level, has plunged by a substantial -73.05%. Since these values are fairly short-term thinking, I’ve estimated an annualized five-year value for Vianini’s net income, which stands at €424.13K This means despite the fact that earnings growth was negative from the prior year, over the long run, Vianini’s profits have been increasing on average.

What’s enabled this growth? Let’s take a look at whether it is merely because of an industry uplift, or if Vianini has seen some company-specific growth. Over the past couple of years, Vianini increased its bottom line faster than revenue by successfully controlling its costs. This resulted in a margin expansion and profitability over time. Looking at growth from a sector-level, the IT basic materials industry has been enduring some headwinds in the prior year, leading to an average earnings drop of -4.19%. This is a major change, given that the industry has constantly been delivering a a strong growth of 31.21% in the past half a decade. This means whatever recent headwind the industry is facing, it’s hitting Vianini harder than its peers.

What does this mean?

Though Vianini’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. I suggest you continue to research Vianini to get a more holistic view of the stock by looking at:

• 1. Financial Health: Is VIA’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. Valuation: What is VIA 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 VIA is currently mispriced by the market.

• 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.