With A -7.96% Earnings Drop, Is Capstead Mortgage Corporation’s (NYSE:CMO) A Concern?
Measuring Capstead Mortgage Corporation’s (NYSE:CMO) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess CMO’s recent performance announced on 31 December 2017 and compare these figures to its historical trend and industry movements. Check out our latest analysis for Capstead Mortgage
Was CMO’s recent earnings decline indicative of a tough track record?
To account for any quarterly or half-yearly updates, I use 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 allows me to examine various companies on a more comparable basis, using the latest information. For Capstead Mortgage, its most recent bottom-line (trailing twelve month) is US$62.00M, which, relative to last year’s figure, has plunged by -7.96%. Since these figures may be fairly short-term, I’ve created an annualized five-year value for CMO’s earnings, which stands at US$104.92M This doesn’t look much better, since earnings seem to have gradually been falling over time.
Why is this? Well, let’s look at what’s going on with margins and whether the rest of the industry is facing the same headwind. Although revenue growth over the past few years, has been negative, earnings growth has been falling by even more, suggesting that Capstead Mortgage has been increasing its expenses. This harms margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US mortgage reits industry has been growing, albeit, at a unexciting single-digit rate of 3.19% in the prior year, and a flatter -0.43% over the past half a decade. This means that whatever headwind the industry is facing, it’s hitting Capstead Mortgage harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Typically companies that experience an extended period of diminishing earnings are undergoing some sort of reinvestment phase However, if the entire industry is struggling to grow over time, it may be a indicator of a structural change, which makes Capstead Mortgage and its peers a higher risk investment. I recommend you continue to research Capstead Mortgage to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CMO’s future growth? Take a look at our free research report of analyst consensus for CMO’s outlook.
Financial Health: Is CMO’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 December 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.
