Measuring CTI Industries Corporation’s (NASDAQ:CTIB) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess CTIB’s recent performance announced on 30 September 2017 and compare these figures to its historical trend and industry movements. View our latest analysis for CTI Industries
Was CTIB’s recent earnings decline worse than the long-term trend and the industry?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to analyze different stocks on a more comparable basis, using the most relevant data points. For CTI Industries, its latest earnings (trailing twelve month) is $0.2M, which, in comparison to the prior year’s figure, has sunken by a non-trivial -31.95%. Since these values are relatively myopic, I have calculated an annualized five-year value for CTIB’s net income, which stands at $0.5M. This doesn’t look much better, as earnings seem to have consistently been falling over the longer term.
Why is this? Let’s examine what’s going on with margins and whether the rest of the industry is experiencing the hit as well. Revenue growth over the last couple of years, has been positive, however earnings growth has been declining. This suggest that CTI Industries has been ramping up expenses, which is hurting margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the US consumer durables industry has been growing its average earnings by double-digit 10.68% over the previous twelve months, and 14.75% over the past five. This suggests that whatever tailwind the industry is deriving benefit from, CTI Industries has not been able to leverage it as much as its industry peers.
What does this mean?
CTI Industries’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Usually companies that experience a drawn out period of diminishing earnings are going through some sort of reinvestment phase with the aim of keeping up with the latest industry expansion and disruption. You should continue to research CTI Industries to get a more holistic view of the stock by looking at:
1. Financial Health: Is CTIB’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 CTIB 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 CTIB 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.