Should You Be Concerned With Coffee Holding Co Inc.’s (NASDAQ:JVA) -75.66% Earnings Drop?
Today I will take a look at Coffee Holding Co Inc.’s (NASDAQ:JVA) most recent earnings update (31 January 2018) and compare these latest figures against its performance over the past few years, as well as how the rest of the food industry performed. As an investor, I find it beneficial to assess JVA’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for Coffee Holding
Was JVA’s weak performance lately a part of a long-term decline?
For the purpose of this commentary, 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 technique allows me to assess different stocks on a similar basis, using the most relevant data points. For Coffee Holding, its latest trailing-twelve-month earnings is US$522.87K, which, in comparison to last year’s figure, has dropped by a substantial -75.66%. Given that these values are relatively myopic, I have determined an annualized five-year figure for JVA’s earnings, which stands at US$1.18M This doesn’t seem to paint a better picture, since earnings seem to have steadily been falling over the longer term.
What could be happening here? Well, let’s take a look at what’s going on with margins and whether the rest of the industry is facing the same headwind. In the last couple of years, Coffee Holding has, on average, delivered negative top- and bottom-line growth. As revenues fell by more, expenses have been slashed in order to sustain margins – not the most sustainable operating activity. Viewing growth from a sector-level, the US food industry has been growing, albeit, at a unexciting single-digit rate of 5.79% in the previous twelve months, and 6.95% over the past five. This means that whatever uplift the industry is profiting from, Coffee Holding has not been able to gain as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that experience an extended period of reduction in earnings are undergoing some sort of reinvestment phase in order to keep up with the latest industry growth and disruption. I suggest you continue to research Coffee Holding to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for JVA’s future growth? Take a look at our free research report of analyst consensus for JVA’s outlook.
2. Financial Health: Is JVA’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 31 January 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.
