AmTrust Financial Services Inc’s (NASDAQ:AFSI) Earnings Dropped -121.62%, Did Its Industry Show Weakness Too?
When AmTrust Financial Services Inc (NASDAQ:AFSI) announced its most recent earnings (30 September 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 AmTrust Financial Services 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 AFSI has performed. Check out our latest analysis for AmTrust Financial Services
Commentary On AFSI’s Past Performance
I look at data from the most recent 12 months, 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 allows me to assess different companies in a uniform manner using the most relevant data points. For AmTrust Financial Services, its most recent trailing-twelve-month earnings is -US$74.86M, which, relative to the prior year’s level, has turned from positive to negative. Given that these figures are fairly myopic, I’ve created an annualized five-year figure for AFSI’s net income, which stands at US$272.30M.
We can further examine AmTrust Financial Services’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade AmTrust Financial Services’s top-line has grown by 25.15% on average, implying that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Looking at growth from a sector-level, the US insurance industry has been growing, albeit, at a unexciting single-digit rate of 6.49% in the previous year, and 8.50% over the past five. This means whatever tailwind the industry is profiting from, AmTrust Financial Services has not been able to realize the gains unlike its industry peers.
What does this mean?
AmTrust Financial Services’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to predict what will happen in the future and when. The most valuable step is to assess company-specific issues AmTrust Financial Services may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research AmTrust Financial Services to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for AFSI’s future growth? Take a look at our free research report of analyst consensus for AFSI’s outlook.
2. Financial Health: Is AFSI’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 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.
