After looking at Home Bancshares Inc (Conway AR)’s (NASDAQ:HOMB) latest earnings announcement (30 September 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Home Bancshares (Conway AR)’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. Check out our latest analysis for Home Bancshares (Conway AR)
Was HOMB’s recent earnings decline indicative of a tough track record?
For the purpose of this commentary, I like 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 blend allows me to analyze various companies in a uniform manner using new information. Home Bancshares (Conway AR)’s latest earnings is $160.4M, which, in comparison to last year’s figure, has fallen by -3.39%. Given that these values are fairly myopic, I have determined an annualized five-year figure for HOMB’s net income, which stands at $96.3M. This means that even though earnings declined from last year, over a longer period of time, Home Bancshares (Conway AR)’s profits have been rising on average.
What’s enabled this growth? Let’s take a look at whether it is solely owing to industry tailwinds, or if Home Bancshares (Conway AR) has experienced some company-specific growth. In the last few years, Home Bancshares (Conway AR) increased its bottom line faster than revenue by efficiently controlling its costs. This has caused a margin expansion and profitability over time. Looking at growth from a sector-level, the US banks industry has been growing, albeit, at a muted single-digit rate of 9.80% in the previous twelve months, and 8.99% over the previous few years. This shows that whatever tailwind the industry is deriving benefit from, Home Bancshares (Conway AR) has not been able to leverage it as much as its industry peers.
What does this mean?
Though Home Bancshares (Conway AR)’s past data is helpful, it is only one aspect of my investment thesis. Companies are profitable, but have capricious earnings, can have many factors affecting its business. You should continue to research Home Bancshares (Conway AR) to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for HOMB’s future growth? Take a look at our free research report of analyst consensus for HOMB’s outlook.
2. Financial Health: Is HOMB’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.
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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.