Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Zylog Systems Limited’s (NSEI:ZYLOG) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. View our latest analysis for Zylog Systems
Were ZYLOG’s earnings stronger than its past performances and the industry?
To account for any quarterly or half-yearly updates, I use 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 technique allows me to assess different companies on a similar basis, using new information. For Zylog Systems, its latest trailing-twelve-month earnings is -₹64.2M, which, against last year’s level, has become less negative. Since these values may be somewhat short-term, I’ve computed an annualized five-year value for ZYLOG’s net income, which stands at -₹1,610.1M. This means that, even though net income is negative, it has become less negative over the years.
Additionally, we can analyze Zylog Systems’s loss by looking at what’s going on in the industry as well as within the company. First, I want to briefly look into the line items. Revenue growth over the past few years has been negative at -34.05%. The key to profitability here is to make sure the company’s cost growth is well-managed. Looking at growth from a sector-level, the IN software industry has been growing its average earnings by double-digit 12.74% over the previous year, and 10.21% over the past five years. This suggests that, although Zylog Systems is currently running a loss, it may have been aided by industry tailwinds, moving earnings towards to 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 hard to envisage what will occur going forward, and when. The most valuable step is to examine company-specific issues Zylog Systems may be facing and whether management guidance has dependably been met in the past. You should continue to research Zylog Systems to get a more holistic view of the stock by looking at:
1. Financial Health: Is ZYLOG’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 30 September 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.