In this commentary, I will examine CPI Aerostructures, Inc.’s (NYSEMKT:CVU) latest earnings update (30 September 2018) and compare these figures against its performance over the past couple of years, as well as how the rest of the aerospace & defense industry performed. As an investor, I find it beneficial to assess CVU’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.
Have CVU’s earnings improved against past performances and the industry?
CVU’s trailing twelve-month earnings (from 30 September 2018) of US$5.9m has increased by 0.9% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 30%, indicating the rate at which CVU is growing has slowed down. 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 terms of returns from investment, CPI Aerostructures has fallen short of achieving a 20% return on equity (ROE), recording 7.5% instead. Furthermore, its return on assets (ROA) of 6.1% is below the US Aerospace & Defense industry of 7.0%, indicating CPI Aerostructures’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for CPI Aerostructures’s debt level, has declined over the past 3 years from 15% to 11%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 40% to 45% over the past 5 years.
What does this mean?
Though CPI Aerostructures’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as CPI Aerostructures gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research CPI Aerostructures to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CVU’s future growth? Take a look at our free research report of analyst consensus for CVU’s outlook.
- Financial Health: Are CVU’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 30 September 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 firstname.lastname@example.org.