Assessing Bassett Furniture Industries Incorporated’s (NASDAQ:BSET) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Bassett Furniture Industries is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its consumer durables industry peers.
Was BSET’s recent earnings decline worse than the long-term trend and the industry?
BSET’s trailing twelve-month earnings (from 26 May 2018) of US$12.9m has declined by -27.7% compared to the previous year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -13.4%, indicating the rate at which BSET is growing has slowed down. Why is this? Well, let’s take a look at what’s occurring with margins and whether the whole industry is facing the same headwind.
Revenue growth in the last few years, has been positive, nevertheless earnings growth has been deteriorating. This implies that Bassett Furniture Industries has been ramping up expenses, which is harming margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the US consumer durables industry has been growing, albeit, at a muted single-digit rate of 5.7% over the previous twelve months, and a substantial 14.6% over the past five. This growth is a median of profitable companies of 24 Consumer Durables companies in US including China Energy Technology, Skyline Champion and Forbo Holding. This means that any uplift the industry is benefiting from, Bassett Furniture Industries has not been able to gain as much as its industry peers.
In terms of returns from investment, Bassett Furniture Industries has fallen short of achieving a 20% return on equity (ROE), recording 6.7% instead. Furthermore, its return on assets (ROA) of 4.6% is below the US Consumer Durables industry of 6.7%, indicating Bassett Furniture Industries’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Bassett Furniture Industries’s debt level, has increased over the past 3 years from 9.5% to 10.0%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 2.0% to 0.3% over the past 5 years.
What does this mean?
Bassett Furniture Industries’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Typically companies that experience an extended period of reduction in earnings are going through some sort of reinvestment phase with the aim of keeping up with the latest industry disruption and growth. I suggest you continue to research Bassett Furniture Industries to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BSET’s future growth? Take a look at our free research report of analyst consensus for BSET’s outlook.
- Financial Health: Are BSET’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 26 May 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.