Yahoo Finance With A -24.54% Earnings Drop, Did Supremex Inc (TSE:SXP) Really Underperform?
After reading Supremex Inc’s (TSX:SXP) most recent earnings announcement (31 March 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. View our latest analysis for Supremex
Despite a decline, did SXP underperform the long-term trend and the industry?
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This technique enables me to analyze many different companies in a uniform manner using the latest information. For Supremex, its most recent trailing-twelve-month earnings is CA$11.66M, which, in comparison to last year’s level, has fallen by -24.54%. Since these figures may be relatively short-term thinking, I have created an annualized five-year figure for SXP’s earnings, which stands at CA$7.78M This shows that though earnings growth was negative from last year, over the longer term, Supremex’s profits have been rising on average.
What’s the driver of this growth? Well, let’s take a look at if it is only a result of industry tailwinds, or if Supremex has seen some company-specific growth. In the past few years, Supremex increased its bottom line faster than revenue by effectively controlling its costs. This has led to a margin expansion and profitability over time. Looking at growth from a sector-level, the Canadian forestry industry has been increasing average earnings growth of 64.62% over the past year, and a strong 21.10% over the previous five years. This means any tailwind the industry is profiting from, Supremex has not been able to realize the gains unlike its industry peers.
What does this mean?
Though Supremex’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. You should continue to research Supremex to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SXP’s future growth? Take a look at our free research report of analyst consensus for SXP’s outlook.
Financial Health: Is SXP’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 March 2018. This may not be consistent with full year annual report figures.
To help readers see pass 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.
