Examining how Buffalo Wild Wings Inc (NASDAQ:BWLD) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how Buffalo Wild Wings is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its hospitality industry peers. Check out our latest analysis for Buffalo Wild Wings
Despite a decline, did BWLD underperform the long-term trend and the industry?
I like to use 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 analyze different companies in a uniform manner using the latest information. For Buffalo Wild Wings, its latest trailing-twelve-month earnings is $64.1M, which compared to the prior year’s figure, has sunken by a substantial -38.55%. Since these values may be relatively myopic, I’ve calculated an annualized five-year value for BWLD’s earnings, which stands at $74.4M. This doesn’t look much better, since earnings seem to have gradually been diminishing over the longer term.
What could be happening here? Well, let’s look at what’s going on with margins and whether the whole industry is experiencing the hit as well. Revenue growth in the past few years, has been positive, however, earnings growth has not been able to catch up, meaning Buffalo Wild Wings has been increasing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the US hospitality industry has been growing its average earnings by double-digit 13.82% over the previous twelve months, and 11.09% over the previous five years. This shows that whatever tailwind the industry is benefiting from, Buffalo Wild Wings has not been able to reap as much as its average peer.
What does this mean?
Though Buffalo Wild Wings’s past data is helpful, it is only one aspect of my investment thesis. In some cases, companies that endure a prolonged period of decline in earnings are going through some sort of reinvestment phase in order to keep up with the latest industry expansion and disruption. I suggest you continue to research Buffalo Wild Wings to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for BWLD’s future growth? Take a look at our free research report of analyst consensus for BWLD’s outlook.
- 2. Financial Health: Is BWLD’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 24 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.