After looking at OtherLevels Holdings Limited’s (ASX:OLV) latest earnings update (31 December 2017), I found it helpful to revisit the company’s performance in the past couple of years 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 an important aspect. In this article I briefly touch on my key findings. Check out our latest analysis for OtherLevels Holdings

Commentary On OLV’s Past Performance

I look at data from the most recent 12 months, 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 the most relevant data points. For OtherLevels Holdings, its most recent earnings (trailing twelve month) is -AU$2.51M, which, against last year’s level, has become less negative. Since these values are somewhat nearsighted, I have estimated an annualized five-year figure for OtherLevels Holdings’s net income, which stands at -AU$5.08M. This means that, though net income is negative, it has become less negative over the years.

We can further evaluate OtherLevels Holdings’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years OtherLevels Holdings’s revenue growth has been somewhat subdued, with an annual growth rate of -0.88%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Scanning growth from a sector-level, the Australian software industry has been growing its average earnings by double-digit 13.49% over the past year, and 15.31% over the last five years. This means that, while OtherLevels Holdings is presently unprofitable, it may have been aided by industry tailwinds, moving earnings in the right direction.

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 predict what will happen in the future and when. The most valuable step is to assess company-specific issues OtherLevels Holdings may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research OtherLevels Holdings to get a more holistic view of the stock by looking at:

• 1. Financial Health: Is OLV’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 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.