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 China Auto Logistics Inc (NASDAQ:CALI) useful as an attempt to give more color around how China Auto Logistics is currently performing. Check out our latest analysis for China Auto Logistics
How CALI fared against its long-term earnings performance and its industry
I use data from the most recent 12 months, 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 method enables me to assess many different companies on a similar basis, using the most relevant data points. For China Auto Logistics, the latest earnings -$1.3M, which compared to the previous year’s figure, has become less negative. Given that these values are somewhat short-term, I’ve calculated an annualized five-year figure for CALI’s net income, which stands at -$3.0M. This means while net income is negative, it has become less negative over the years.
We can further assess China Auto Logistics’s loss by looking at what’s going on in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over last couple of years has been fairly unexciting, remaining flat on average at 1.97%. Since top-line growth is also pretty flat, the key to profitability going forward would be managing cost growth rates. Inspecting growth from a sector-level, the US specialty retail industry has been growing, albeit, at a muted single-digit rate of 8.14% in the prior year, and 5.98% over the past five. This means even though China Auto Logistics is presently loss-making, it may have gained from industry tailwinds, moving earnings in the right direction.
What does this mean?
China Auto Logistics’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to predict what will occur going forward, and when. The most insightful step is to assess company-specific issues China Auto Logistics may be facing and whether management guidance has dependably been met in the past. You should continue to research China Auto Logistics to get a more holistic view of the stock by looking at:
1. Financial Health: Is CALI’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. 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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.