When Career Education Corporation (NASDAQ:CECO) released its most recent earnings update (31 March 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Career Education’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not CECO actually performed well. Below is a quick commentary on how I see CECO has performed. See our latest analysis for Career Education
Was CECO’s weak performance lately a part of a long-term decline?
I prefer to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to analyze different companies on a similar basis, using the most relevant data points. For Career Education, its most recent bottom-line (trailing twelve month) is -US$18.59M, which, against the previous year’s figure, has become more negative. Since these values may be fairly myopic, I have calculated an annualized five-year figure for Career Education’s earnings, which stands at -US$54.63M. This means that, although net income is negative, it has become less negative over the years.
We can further analyze Career Education’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Career Education has seen an annual decline in revenue of -17.65%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the US consumer services industry has been growing its average earnings by double-digit 15.70% in the past twelve months, and 15.07% over the past five years. This suggests that whatever uplift the industry is profiting from, Career Education has not been able to realize the gains unlike its average peer.
What does this mean?
Career Education’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 predict what will happen in the future and when. The most useful step is to assess company-specific issues Career Education may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Career Education to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CECO’s future growth? Take a look at our free research report of analyst consensus for CECO’s outlook.
- Financial Health: Is CECO’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 March 2018. 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.