YPB Group Limited (ASX:YPB): Should The Recent Earnings Drop Worry You?
Understanding how YPB Group Limited (ASX:YPB) is performing as a company requires looking at more than just a years' earnings. Today I will run you through a basic sense check to gain perspective on how YPB Group is doing by comparing its latest earnings with its long-term trend as well as the performance of its professional services industry peers.
View our latest analysis for YPB Group
Despite a decline, did YPB underperform the long-term trend and the industry?
YPB is loss-making, with the most recent trailing twelve-month earnings of -AU$8.0m (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 -AU$11.9m. Each year, for the past five years YPB has seen an annual decline in revenue of -1.9%, on average. This adverse movement is a driver of the company's inability to reach breakeven.
Looking at growth from a sector-level, the Australian professional services industry has been growing its average earnings by double-digit 13% over the past year, and 11% over the past five. This growth is a median of profitable companies of 11 Professional Services companies in AU including Kelly Partners Group Holdings, Aerometrex and QANTM Intellectual Property. This suggests that any uplift the industry is enjoying, YPB Group has not been able to leverage it as much as its average peer.
Given that YPB Group is not profitable, even if operating expenses (SG&A and one-year R&D) continues to fall at previous year’s rate of -3.5%, the company’s current cash level (AU$774k) 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 YPB Group still can cut its overhead further, or raise debt capital instead of coming to equity markets, 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?
YPB Group's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will happen in the future and when. The most insightful step is to assess company-specific issues YPB Group may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research YPB Group to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for YPB’s future growth? Take a look at our free research report of analyst consensus for YPB’s outlook.
Financial Health: Are YPB’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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