Should Orascom Development Holding AG's (VTX:ODHN) Recent Earnings Decline Worry You?

Simply Wall St

When Orascom Development Holding AG (VTX:ODHN) released its most recent earnings update (31 March 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Orascom Development Holding has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see ODHN has performed.

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View our latest analysis for Orascom Development Holding

Was ODHN's weak performance lately a part of a long-term decline?

ODHN is loss-making, with the most recent trailing twelve-month earnings of -CHF36.3m (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 -CHF73.1m. Each year, for the past five years ODHN has seen an annual increase in operating expense growth, outpacing revenue growth of 4.4%, on average. This adverse movement is a driver of the company's inability to reach breakeven.

Viewing growth from a sector-level, the CH hospitality industry has been growing its average earnings by double-digit 11% over the previous year,

SWX:ODHN Income Statement, May 27th 2019

Although Orascom Development Holding 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 CHF52m) over the next year. This is a sign of good cash management.

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 predict what will occur going forward, and when. The most valuable step is to assess company-specific issues Orascom Development Holding may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Orascom Development Holding to get a better picture of the stock by looking at:

  1. Financial Health: Are ODHN’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 March 2019. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.