After reading American Lorain Corporation’s (AMEX:ALN) most recent earnings announcement (31 March 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether American Lorain’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. View our latest analysis for American Lorain
How ALN fared against its long-term earnings performance and its industry
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This allows me to assess different companies on a similar basis, using the most relevant data points. For American Lorain, its latest earnings (trailing twelve month) is -US$23.71M, which compared to the previous year’s level, has become less negative. Given that these values may be fairly nearsighted, I’ve estimated an annualized five-year value for ALN’s net income, which stands at -US$4.14M. This shows that, American Lorain has historically performed better than recently, even though it seems like earnings are now heading back towards to right direction again.
We can further examine American Lorain’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade American Lorain has seen an annual decline in revenue of -19.83%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Scanning growth from a sector-level, the US food industry has been growing, albeit, at a muted single-digit rate of 7.61% in the previous year, and 7.20% over the past five years. This suggests that, although American Lorain is presently unprofitable, it may have benefited from industry tailwinds, moving earnings into a more favorable position.
What does this mean?
American Lorain’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to envisage what will occur going forward, and when. The most useful step is to examine company-specific issues American Lorain may be facing and whether management guidance has dependably been met in the past. You should continue to research American Lorain to get a better picture of the stock by looking at:
- Financial Health: Is ALN’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.
- Valuation: What is ALN worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ALN is currently mispriced by the market.
- 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.