After reading Citizens Holding Company’s (NASDAQ:CIZN) latest earnings update (30 September 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether CIZN has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. See our latest analysis for Citizens Holding
Despite a decline, did CIZN underperform the long-term trend and the industry?
I prefer to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to analyze many different companies in a uniform manner using the latest information. For Citizens Holding, its most recent trailing-twelve-month earnings is $6.5M, which, in comparison to last year’s figure, has dropped by -11.92%. Given that these figures are fairly short-term thinking, I’ve calculated an annualized five-year figure for Citizens Holding’s net income, which stands at $7.1M. This doesn’t look much better, since earnings seem to have gradually been deteriorating over time.
Why is this? Let’s examine what’s transpiring with margins and if the rest of the industry is feeling the heat. Revenue growth in the past couple of years, has been positive, nevertheless earnings growth has been deteriorating. This means Citizens Holding has been ramping up expenses, which is harming margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the US banks industry has been growing, albeit, at a unexciting single-digit rate of 9.30% in the prior year, and 8.52% over the past five. This means whatever tailwind the industry is benefiting from, Citizens Holding has not been able to gain as much as its industry peers.
What does this mean?
Though Citizens Holding’s past data is helpful, it is only one aspect of my investment thesis. In some cases, companies that face a drawn out period of reduction in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and growth. I suggest you continue to research Citizens Holding to get a better picture of the stock by looking at:
- 1. Financial Health: Is CIZN’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.
- 2. Valuation: What is CIZN worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CIZN is currently mispriced by the market.
- 3. 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 30 September 2017. 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.