Investors with a long-term horizong may find it valuable to assess Threat Protect Australia Limited’s (ASX:TPS) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Threat Protect Australia is currently performing. See our latest analysis for Threat Protect Australia
Did TPS’s recent earnings growth beat 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 analyze different stocks on a similar basis, using new information. For Threat Protect Australia, its most recent bottom-line (trailing twelve month) is -AU$45.85K, which compared to the previous year’s figure, has become less negative. Given that these figures may be relatively nearsighted, I’ve estimated an annualized five-year value for Threat Protect Australia’s net income, which stands at -AU$2.10M. This suggests that, though net income is negative, it has become less negative over the years.
We can further assess Threat Protect Australia’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Threat Protect Australia’s top-line has risen by 26.93% on average, indicating that the company is in a high-growth phase with expenses racing ahead revenues, leading to annual losses. Looking at growth from a sector-level, the Australian commercial services industry has been growing its average earnings by double-digit 17.34% over the past twelve months, and a less exciting 4.66% over the previous five years. This shows that, while Threat Protect Australia is presently unprofitable, it may have been aided by industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Though Threat Protect Australia’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to envisage what will occur going forward, and when. The most useful step is to assess company-specific issues Threat Protect Australia may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Threat Protect Australia to get a better picture of the stock by looking at:
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Financial Health: Is TPS’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 TPS 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 TPS 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 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.