For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on BMTC Group Inc (TSX:GBT) useful as an attempt to give more color around how BMTC Group is currently performing. See our latest analysis for BMTC Group
How GBT fared against its long-term earnings performance and its industry
I prefer to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend enables me to analyze different stocks on a more comparable basis, using the most relevant data points. For BMTC Group, its latest trailing-twelve-month earnings is CA$49.29M, which compared to the previous year’s figure, has climbed up by 16.26%. Since these figures may be relatively short-term, I’ve determined an annualized five-year value for GBT’s earnings, which stands at CA$51.49M This suggests that, while earnings increased from last year’s level, over time, BMTC Group’s earnings have been diminishing on average.
Why is this? Let’s examine what’s occurring with margins and if the whole industry is feeling the heat. Although revenue growth over the past couple of years, has been negative, earnings growth has been deteriorating by even more, suggesting that BMTC Group has been increasing its expenses. This hurts margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the Canadian specialty retail industry has been growing its average earnings by double-digit 17.42% over the previous year, and a less exciting 8.92% over the past half a decade. This suggests that whatever uplift the industry is profiting from, BMTC Group has not been able to reap as much as its industry peers.
What does this mean?
Though BMTC Group’s past data is helpful, it is only one aspect of my investment thesis. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be variables that are influencing the industry as a whole, thus the high industry growth rate over the same time frame. You should continue to research BMTC Group to get a better picture of the stock by looking at:
- 1. Financial Health: Is GBT’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.
- 2. Valuation: What is GBT 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 GBT is currently mispriced by the market.
- 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.