Yahoo Finance

After reading WISE Group AB’s (OM:WISE) most recent earnings announcement (31 December 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. View our latest analysis for WISE Group

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

For the purpose of this commentary, I like 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 method enables me to analyze many different companies on a similar basis, using new information. For WISE Group, its most recent bottom-line (trailing twelve month) is KR25.02M, which compared to last year’s level, has declined by -18.97%. Given that these figures may be somewhat short-term thinking, I’ve estimated an annualized five-year figure for WISE’s net income, which stands at KR19.07M This shows that though earnings growth was negative against the previous year, over time, WISE Group’s earnings have been increasing on average.

What’s enabled this growth? Let’s take a look at whether it is solely a result of an industry uplift, or if WISE Group has seen some company-specific growth. The climb in earnings seems to be supported by a strong top-line increase overtaking its growth rate of expenses. Though this resulted in a margin contraction, it has made WISE Group more profitable. Looking at growth from a sector-level, the SE professional services industry has been growing, albeit, at a muted single-digit rate of 6.55% in the past year, . This is a turnaround from a volatile drop of -3.76% in the previous few years. This suggests that, in the recent industry expansion, WISE Group has not been able to realize the gains unlike its industry peers.

What does this mean?

Though WISE Group’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. I suggest you continue to research WISE Group to get a more holistic view of the stock by looking at:

• 1. Financial Health: Is WISE’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 WISE 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 WISE 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.