After reading Jiangsu NandaSoft Technology Company Limited's (HKG:8045) most recent earnings announcement (31 March 2019), 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.
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Did 8045 perform worse than its track record and industry?
8045 is loss-making, with the most recent trailing twelve-month earnings of -CN¥52.4m (from 31 March 2019), which compared to last year has become more negative. However, the company's loss seem to be contracting over the medium term, with the five-year earnings average of -CN¥56.0m. Each year, for the past five years 8045 has seen an annual decline in revenue of -6.1%, on average. This adverse movement is a driver of the company's inability to reach breakeven.
Looking at growth from a sector-level, the HK it industry has been growing its average earnings by double-digit 26% in the previous year,
Although Jiangsu NandaSoft Technology is loss-making, its has a good cash runway to meet its upcoming operating expense (should SG&A and one-year R&D remain constant at the current level of CN¥62m) over the next year. This is a strong indication of good cash management.
What does this mean?
Jiangsu NandaSoft Technology's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that incur net loss is always hard to envisage what will occur going forward, and when. The most useful step is to examine company-specific issues Jiangsu NandaSoft Technology may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Jiangsu NandaSoft Technology to get a more holistic view of the stock by looking at:
- Financial Health: Are 8045’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.
- 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 March 2019. This may not be consistent with full year annual report figures.
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