Yahoo Finance Should You Be Happy With Forbidden Technologies plc’s (LON:FBT) Performance Lately?
Today I will examine Forbidden Technologies plc’s (LON:FBT) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of FBT’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
View our latest analysis for Forbidden Technologies
Commentary On FBT’s Past Performance
FBT is loss-making, with the most recent trailing twelve-month earnings of -UK£2.3m (from 31 December 2017), which compared to last year has become less negative. Furthermore, the company’s loss seem to be growing over time, with the five-year earnings average of -UK£1.7m. Each year, for the past five years FBT has seen an annual increase in operating expense growth, outpacing revenue growth of 3.2%, on average. This adverse movement is a driver of the company’s inability to reach breakeven.
Inspecting growth from a sector-level, the UK software industry has been growing its average earnings by double-digit 10.5% in the past year, and 12.8% over the last five years. This growth is a median of profitable companies of 25 Software companies in GB including IMImobile, Netcall and Frontier Developments. This means any uplift the industry is enjoying, Forbidden Technologies has not been able to gain as much as its average peer.
Given that Forbidden Technologies is loss-making, with operating expenses (opex) growing year-on-year at 9.3%, it may need to raise more cash over the next year. It currently has UK£1.8m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached UK£2.4m in the latest twelve months. Although this is a relatively simplistic calculation, and Forbidden Technologies may reduce its costs or open a new line of credit instead of issuing new equity shares, the analysis still helps us understand how sustainable the Forbidden Technologies’s operation is, and when things may have to change.
What does this mean?
Forbidden Technologies’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 forecast what will occur going forward, and when. The most insightful step is to examine company-specific issues Forbidden Technologies may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research Forbidden Technologies to get a more holistic view of the stock by looking at:
Financial Health: Are FBT’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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
