Should Capital Senior Living Corporation’s (NYSE:CSU) Recent Earnings Decline Worry You?
Today I will examine Capital Senior Living Corporation’s (NYSE:CSU) latest earnings update (30 September 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of CSU’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. View our latest analysis for Capital Senior Living
How Well Did CSU Perform?
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 method enables me to examine many different companies on a similar basis, using new information. For Capital Senior Living, its most recent bottom-line (trailing twelve month) is -$48.3M, which, against the previous year’s figure, has become more negative. Since these figures are fairly nearsighted, I have created an annualized five-year figure for Capital Senior Living’s net income, which stands at -$15.2M. This doesn’t seem to paint a better picture, as earnings seem to have steadily been getting more and more negative over time.
Additionally, we can evaluate Capital Senior Living’s loss by looking at what’s going on in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over the past few years has grown by 10.57%, signalling that Capital Senior Living is in a high-growth period with expenses racing ahead high top-line growth rates, leading to yearly losses. Eyeballing growth from a sector-level, the US healthcare industry has been growing, albeit, at a muted single-digit rate of 8.11% over the past twelve months, and 9.94% over the previous five years. This suggests that any tailwind the industry is profiting from, Capital Senior Living has not been able to gain as much as its average peer.
What does this mean?
Capital Senior Living’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 difficult to forecast what will happen in the future and when. The most insightful step is to examine company-specific issues Capital Senior Living may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Capital Senior Living to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for CSU’s future growth? Take a look at our free research report of analyst consensus for CSU’s outlook.
2. Financial Health: Is CSU’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.
