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Does Citi Trends, Inc.'s (NASDAQ:CTRN) Recent Track Record Look Strong?

Simply Wall St

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After looking at Citi Trends, Inc.'s (NASDAQ:CTRN) latest earnings announcement (04 May 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Citi Trends's performance has been impacted by industry movements. In this article I briefly touch on my key findings.

View our latest analysis for Citi Trends

Were CTRN's earnings stronger than its past performances and the industry?

CTRN's trailing twelve-month earnings (from 04 May 2019) of US$18m has increased by 5.4% 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 19%, indicating the rate at which CTRN is growing has slowed down. What could be happening here? Well, let's look at what's going on with margins and if the whole industry is experiencing the hit as well.

NasdaqGS:CTRN Income Statement, July 8th 2019

In terms of returns from investment, Citi Trends has fallen short of achieving a 20% return on equity (ROE), recording 9.4% instead. Furthermore, its return on assets (ROA) of 3.8% is below the US Specialty Retail industry of 5.6%, indicating Citi Trends's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Citi Trends’s debt level, has declined over the past 3 years from 9.0% to 7.0%.

What does this mean?

Though Citi Trends's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Citi Trends to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for CTRN’s future growth? Take a look at our free research report of analyst consensus for CTRN’s outlook.
  2. Financial Health: Are CTRN’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 04 May 2019. 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.