Does Ceres Global Ag Corp.’s (TSE:CRP) -7.2% Earnings Drop Reflect A Longer Term Trend?
For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Ceres Global Ag Corp. (TSE:CRP) useful as an attempt to give more color around how Ceres Global Ag is currently performing.
Check out our latest analysis for Ceres Global Ag
Was CRP’s recent earnings decline indicative of a tough track record?
CRP is loss-making, with the most recent trailing twelve-month earnings of -US$13.6m (from 31 December 2018), which compared to last year has become more negative. Furthermore, the company’s loss seem to be growing over time, with the five-year earnings average of -US$9.1m. Each year, for the past five years CRP has seen an annual increase in operating expense growth, outpacing revenue growth of 21%, on average. This adverse movement is a driver of the company’s inability to reach breakeven.
Looking at growth from a sector-level, the Canadian commercial services industry has been growing, albeit, at a muted single-digit rate of 6.3% in the prior year,
Given that Ceres Global Ag is loss-making, with operating expenses (opex) growing year-on-year at 5.0%, it may need to raise more cash over the next year. It currently has US$1.9m in cash and short-term investments, however, opex (SG&A and one-year R&D) reached US$13m in the latest twelve months. Even though this is analysis is fairly basic, and Ceres Global Ag still can cut its overhead in the near future, or raise debt capital instead of coming to equity markets, the outcome of this analysis still helps us understand how sustainable the Ceres Global Ag’s operation is, and when things may have to change.
What does this mean?
Though Ceres Global Ag’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to envisage what will happen in the future and when. The most useful step is to assess company-specific issues Ceres Global Ag may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Ceres Global Ag to get a better picture of the stock by looking at:
Financial Health: Are CRP’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 31 December 2018. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
