October 22, 2015
Chineseinvestors.com, Inc. reports financial results for the quarter ended August 31, 2015.
Summary numbers: Revenues of USD 0.107 million, Net Earnings of USD -0.75 million, and Earnings per Share (EPS) of USD -0.10.
Gross margins narrowed from 65.60% to -48.05% compared to the same quarter last year, operating (EBITDA) margins now -418.33% from -1.70%.
Change in operating cash flow of -102.01% compared to same quarter last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
Narrowing of operating margins contributed to decline in earnings.
The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:
Market Share Versus Profits
Compared to the same period last year, CIIX-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if CIIX-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -66.58% and earnings by 76.56% compared to the previous period.
Earnings Growth Analysis
The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 65.60% to -48.05%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from -1.70% to -418.33% in this time frame. For comparison, gross margins were 41.17% and EBITDA margins were -83.17% in the previous period.
Gross Margin Trend
Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.
CIIX-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 774.49 days, compared to last year’s level of 178.60 days.
Cash Versus Earnings – Sustainable Performance?
CIIX-US‘s year-on-year change in operating cash flow of -102.01% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.
The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from -2.60% to -421.88% and (2) one-time items that contributed to a decrease in pretax margins from -17.84% to -450.20%
Chineseinvestors.com, Inc. engages in providing Chinese language web-based real-time financial information. Its services include real-time market commentary, analysis, and educational related services in Chinese language character sets; support services; consultative services to smaller private companies considering becoming a public company; and advertising and public relation related support services. The company was founded by Wei Wang on January 6, 1997 and is headquartered in Aurora, CO.
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