Dear Readers
Elsoft Research Bhd's ("Elsoft") was published on 22 May 2017. I have had a read of the report since.
This post is a summary of the pertinent contents of the report and my thoughts of Elsoft's performance throughout Q1 FY2017.
In the corresponding period in FY2016, Elsoft only achieved an EPS of 0.57 cent compared to 2.20 cents in Q1 FY2017. That's an increase of 285%. I was ecstatic! What a good way to start a year. Notwithstanding that, the market had an unexpected contrary view which caused Elsoft's shares to drop 4.12% on 23 May 2017. This could well be that the market had so much expectation that Elsoft would perform much better than the last quarter (which it didn't).
At the end of the day, it is a matter of perception. Should this quarter be compared to another quarter on an YoY (year over year) basis or QoQ (quarter on quarter) basis?
QoQ comparison may not be able to consider seasonal factors which may affect the demand and thus the earnings of a company throughout a year. Therefore YoY offers a better picture for comparison.
I am of the opinion that the semiconductor industry is seasonal in nature albeit to a lesser extend than say the airlines or retail industry. For example, most smartphone flagships are released in August or September (just enough time for people to lust over them before the holiday season). Even if Elsoft states that it not affected by seasonal or cyclical factors, I am of the opinion that Elsoft's fortune does somewhat hinges on semi conductor production. This is because an increase in smartphone production, for example, will increase the need for more automated testing equipment. Therefore to compare performance on a YoY basis would be more appropriate in Elsoft's case.
However, how I look at things may not be how you look at things given that both of us are looking and analysing the same set of data.
The legendary Peter Lynch has often recited in his book "One Up on Wall Street" that humans are often irrational beings. This creates inefficiencies in the market which can be exploited as opportunities. When opportunities come by (very so often), make full use of them.
This was why I construed the drop in the share price, after the announcement of the Q1 FY2017 report, as an opportunity to purchase more shares in Elsoft on the backdrop of its sound financial performance and potentials.
For more info, please visit https://bursagoinglong.wordpress.com/2017/05/26/analysis-of-elsoft-research-bhds-q1-fy2017-report/
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Created by bursagoinglong | Mar 02, 2018
Every company starts from a few million in revenue. Don't forget that.
2017-05-27 09:26
stockmanmy
a company with a few million revenue per quarter, you cannot analyse too much....just look at big picture and place your bets.
2017-05-26 20:35