Did CAE Inc’s (TSE:CAE) Recent Earnings Growth Beat The Trend?
For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on CAE Inc (TSX:CAE) useful as an attempt to give more color around how CAE is currently performing. See our latest analysis for CAE
How Well Did CAE Perform?
I like 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 blend enables me to analyze many different companies on a similar basis, using new information. For CAE, its latest earnings (trailing twelve month) is CA$264.0M, which compared to last year’s level, has climbed up by 11.82%. Given that these values are relatively myopic, I’ve determined an annualized five-year figure for CAE’s earnings, which stands at CA$197.5M. This suggests that, on average, CAE has been able to increasingly grow its bottom line over the past couple of years as well.
How has it been able to do this? Let’s see whether it is merely due to an industry uplift, or if CAE has seen some company-specific growth. Over the last couple of years, CAE increased its bottom line faster than revenue by efficiently controlling its costs. This has led to a margin expansion and profitability over time. Looking at growth from a sector-level, the Canadian aerospace & defense industry has been enduring some headwinds over the prior twelve months, leading to an average earnings drop of -21.45%. This is a major change, given that the industry has been delivering a positive rate of 5.38%, on average, over the previous five years. This means whatever recent headwind the industry is experiencing, CAE is relatively better-cushioned than its peers.
What does this mean?
Though CAE’s past data is helpful, it is only one aspect of my investment thesis. While CAE has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research CAE to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for CAE’s future growth? Take a look at our free research report of analyst consensus for CAE’s outlook.
2. Financial Health: Is CAE’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 30 September 2017. 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.
