Yahoo Finance Did The Gap Inc’s (NYSE:GPS) Recent Earnings Growth Beat The Trend?
In this article, I will take a look at The Gap Inc’s (NYSE:GPS) most recent earnings update (05 May 2018) and compare these latest figures against its performance over the past few years, along with how the rest of GPS’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. View our latest analysis for Gap
How GPS fared against its long-term earnings performance and its industry
I look at data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend enables me to assess various companies on a more comparable basis, using the most relevant data points. For Gap, its most recent earnings (trailing twelve month) is US$869.00M, which compared to last year’s figure, has jumped up by 23.86%. Since these values may be fairly short-term, I have calculated an annualized five-year figure for GPS’s earnings, which stands at US$1.01B This suggests that, even though earnings growth from last year was positive, over time, Gap’s earnings have been deteriorating on average.
What could be happening here? Let’s examine what’s going on with margins and if the whole industry is facing the same headwind. Revenue growth in the last few years, has been positive, nevertheless earnings growth has been falling. This suggest that Gap has been increasing expenses, which is hurting margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US specialty retail industry has been growing, albeit, at a muted single-digit rate of 4.58% over the prior twelve months, and 6.17% over the last five years. This suggests that any recent headwind the industry is experiencing, Gap is relatively better-cushioned than its peers.
What does this mean?
Gap’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company.
You should continue to research Gap to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for GPS’s future growth? Take a look at our free research report of analyst consensus for GPS’s outlook.
Financial Health: Is GPS’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 05 May 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.
