After reading CPFL Energia SA’s (NYSE:CPL) most recent earnings announcement (30 September 2017), 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 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 CPFL Energia S.A’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for CPL
How Did CPL’s Recent Performance Stack Up Against Its Past?
For the most up-to-date info, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This enables me to analyze various companies on a more comparable basis, using the latest information. For CPFL Energia S.A, the latest twelve-month earnings is R$859.3M, which, against last year’s level, has fallen by -19.45%. Given that these figures may be somewhat short-term thinking, I’ve calculated an annualized five-year value for CPFL Energia S.A’s net income, which stands at R$1,090.4M. This doesn’t look much better, since earnings seem to have consistently been declining over the longer term.
Why could this be happening? Well, let’s look at what’s occurring with margins and whether the entire industry is facing the same headwind. Revenue growth over the past few years, has been positive, however earnings growth has been falling. This means CPFL Energia S.A has been growing expenses, which is hurting margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US electric utilities industry has been growing, albeit, at a unexciting single-digit rate of 5.63% in the past twelve months, and 3.58% over the previous few years. This suggests that any tailwind the industry is benefiting from, CPFL Energia S.A has not been able to leverage it as much as its industry peers.
What does this mean?
Though CPFL Energia S.A’s past data is helpful, it is only one aspect of my investment thesis. Typically companies that experience a prolonged period of diminishing earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and expansion. I recommend you continue to research CPFL Energia S.A to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for CPL’s future growth? Take a look at our free research report of analyst consensus for CPL’s outlook.
2. Financial Health: Is CPL’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 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.