Measuring Broo Limited’s (ASX:BEE) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess BEE’s recent performance announced on 31 December 2017 and compare these figures to its historical trend and industry movements. Check out our latest analysis for Broo
Was BEE’s recent earnings decline indicative of a tough track record?
I like to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method allows me to examine various companies in a uniform manner using the latest information. For Broo, its latest trailing-twelve-month earnings is -AU$4.23M, which, relative to last year’s level, has become more negative. Given that these values may be fairly myopic, I’ve determined an annualized five-year value for Broo’s net income, which stands at -AU$2.48M. This doesn’t look much better, as earnings seem to have steadily been getting more and more negative over time.
We can further analyze Broo’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Broo’s top-line has increased by 10.18% on average, implying that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Viewing growth from a sector-level, the Australian beverage industry has been growing its average earnings by double-digit 27.58% over the past year, and a more muted 9.37% over the past five years. This means that any uplift the industry is deriving benefit from, Broo has not been able to reap as much as its average peer.
What does this mean?
Though Broo’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to forecast what will happen in the future and when. The most valuable step is to examine company-specific issues Broo may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Broo to get a more holistic view of the stock by looking at:
- Financial Health: Is BEE’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 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.