Yahoo Finance Want To Invest In Starcom plc (LON:STAR)? Here's How It Performed Lately
Measuring Starcom plc's (AIM:STAR) 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 STAR's recent performance announced on 31 December 2019 and compare these figures to its historical trend and industry movements.
View our latest analysis for Starcom
Despite a decline, did STAR underperform the long-term trend and the industry?
STAR is loss-making, with the most recent trailing twelve-month earnings of -US$1.0m (from 31 December 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 -US$1.6m. Each year, for the past five years STAR has seen an annual increase in operating expense growth, outpacing revenue growth of 6.3%, on average. This adverse movement is a driver of the company's inability to reach breakeven.
Viewing growth from a sector-level, the UK software industry has been growing, albeit, at a subdued single-digit rate of 3.4% over the past twelve months, and a substantial 17% over the previous five years. This growth is a median of profitable companies of 25 Software companies in GB including Blancco Technology Group, Stilo International and Petards Group. This means whatever near-term headwind the industry is enduring, it’s hitting Starcom harder than its peers.
Given that Starcom is not profitable, even if operating expenses (SG&A and one-year R&D) continues to fall at previous year’s rate of -8.1%, the company’s current cash level (US$158k) will still be insufficient to cover its expenses in the upcoming year. This is not a great sign in terms of operations and cash management. Even though this is analysis is fairly basic, and Starcom still can cut its overhead further, or open a new line of credit instead of issuing new equity shares, the outcome of this analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
What does this mean?
Starcom'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 happen in the future and when. The most useful step is to assess company-specific issues Starcom may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Starcom to get a more holistic view of the stock by looking at:
Financial Health: Are STAR’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 2019. This may not be consistent with full year annual report figures.
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.
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