Today I will take a look at Fuling Global Inc’s (NASDAQ:FORK) most recent earnings update (30 September 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the consumer durables industry performed. As an investor, I find it beneficial to assess FORK’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. Check out our latest analysis for Fuling Global
How Well Did FORK Perform?
I like to 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 technique enables me to examine different stocks on a more comparable basis, using the latest information. “For Fuling Global, its “, latest twelve-month earnings is $5.4M, which, against last year’s level, has fallen by a large -37.59%. Given that these values are fairly short-term thinking, I’ve calculated an annualized five-year value for Fuling Global’s net income, which stands at $7.4M. This doesn’t look much better, since earnings seem to have gradually been diminishing over the longer term.
What could be happening here? Let’s examine what’s occurring with margins and if the rest of the industry is facing the same headwind. Revenue growth in the past couple of years, has been positive, however, earnings growth has not been able to catch up, meaning Fuling Global has been growing its expenses by a lot more. This hurts 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 11.28% in the prior twelve months, and 14.86% over the past five. This shows that whatever uplift the industry is enjoying, Fuling Global has not been able to realize the gains unlike its industry peers.
What does this mean?
Fuling Global’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. In some cases, companies that endure a prolonged period of diminishing earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry disruption and expansion. I recommend you continue to research Fuling Global to get a more holistic view of the stock by looking at:
1. Financial Health: Is FORK’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.