After reading Ocean Bio-Chem, Inc.'s (NasdaqCM:OBCI) most recent earnings announcement (30 June 2019), 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 tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
Were OBCI's earnings stronger than its past performances and the industry?
OBCI's trailing twelve-month earnings (from 30 June 2019) of US$2.9m has increased by 3.0% 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 20%, indicating the rate at which OBCI is growing has slowed down. To understand what's happening, let's examine what's occurring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Ocean Bio-Chem has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. However, its return on assets (ROA) of 8.2% exceeds the US Household Products industry of 7.3%, indicating Ocean Bio-Chem has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Ocean Bio-Chem’s debt level, has declined over the past 3 years from 14% to 11%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 7.0% to 18% over the past 5 years.
What does this mean?
Though Ocean Bio-Chem's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Ocean Bio-Chem gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Ocean Bio-Chem to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for OBCI’s future growth? Take a look at our free research report of analyst consensus for OBCI’s outlook.
- Financial Health: Are OBCI’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 June 2019. This may not be consistent with full year annual report figures.
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