With A -86.68% Earnings Drop, Is Golden Entertainment Inc’s (NASDAQ:GDEN) A Concern?
When Golden Entertainment Inc (NASDAQ:GDEN) announced its most recent earnings (31 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Golden Entertainment has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see GDEN has performed. View our latest analysis for Golden Entertainment
How Well Did GDEN Perform?
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method allows me to analyze various companies on a more comparable basis, using the most relevant data points. For Golden Entertainment, its latest earnings (trailing twelve month) is US$2.17M, which, against the previous year’s level, has dropped by a large -86.68%. Since these figures may be fairly short-term, I’ve created an annualized five-year figure for Golden Entertainment’s earnings, which stands at US$4.88M This doesn’t look much better, since earnings seem to have gradually been diminishing over the longer term.
What could be happening here? Let’s examine what’s going on with margins and whether the rest of the industry is feeling the heat. Revenue growth over the past couple of years, has been positive, however, earnings growth has been lagging behind meaning Golden Entertainment has been ramping up its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US hospitality industry has been growing its average earnings by double-digit 16.05% over the prior year, and 11.70% over the past five. This means whatever uplift the industry is benefiting from, Golden Entertainment has not been able to gain as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that face an extended period of reduction in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the latest industry expansion and disruption. I suggest you continue to research Golden Entertainment to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for GDEN’s future growth? Take a look at our free research report of analyst consensus for GDEN’s outlook.
Financial Health: Is GDEN’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.
