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Today I will examine Tantech Holdings Ltd’s (NASDAQ:TANH) latest earnings update (30 June 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of TANH’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. See our latest analysis for Tantech Holdings
Was TANH’s weak performance lately a part of a long-term decline?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, 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 allows me to analyze different stocks on a similar basis, using the latest information. For Tantech Holdings, its latest trailing-twelve-month earnings is US$1.67M, which, against the previous year’s level, has plunged by a non-trivial -67.22%. Given that these values may be fairly short-term, I have created an annualized five-year figure for Tantech Holdings’s earnings, which stands at US$8.67M This doesn’t look much better, as earnings seem to have gradually been deteriorating over time.
Why is this? Well, let’s look at what’s going on with margins and whether the whole industry is facing the same headwind. Although revenue growth in the past few years, has been negative, earnings growth has been declining by even more, suggesting that Tantech Holdings has been ramping up its expenses. This hurts margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US chemicals industry has been growing its average earnings by double-digit 13.71% in the previous year, and a more muted 4.26% over the last five years. This shows that any tailwind the industry is profiting from, Tantech Holdings has not been able to reap as much as its average peer.
What does this mean?
Tantech Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Typically companies that experience a prolonged period of diminishing earnings are going through some sort of reinvestment phase in order to keep up with the latest industry disruption and expansion. You should continue to research Tantech Holdings to get a more holistic view of the stock by looking at:
1. Financial Health: Is TANH’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 TANH 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 TANH 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 June 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.