Analyzing Insteel Industries Inc’s (NASDAQ:IIIN) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess IIIN’s recent performance announced on 30 June 2018 and compare these figures to its long-term trend and industry movements.
Did IIIN’s recent earnings growth beat the long-term trend and the industry?
IIIN’s trailing twelve-month earnings (from 30 June 2018) of US$30.7m has increased by 6.9% 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 27.4%, indicating the rate at which IIIN is growing has slowed down. To understand what’s happening, let’s examine what’s occurring with margins and if the rest of the industry is facing the same headwind.
Over the past couple of years, revenue growth has been lagging behind which suggests that Insteel Industries’s bottom line has been driven by unsustainable cost-cutting.
Inspecting growth from a sector-level, the US building industry has been growing, albeit, at a muted single-digit rate of 6.9% in the past year, and a substantial 21.3% over the past five. This growth is a median of profitable companies of 24 Building companies in US including Caesarstone, Builders FirstSource and Burnham Holdings.
In terms of returns from investment, Insteel Industries has fallen short of achieving a 20% return on equity (ROE), recording 13.3% instead. However, its return on assets (ROA) of 10.4% exceeds the US Building industry of 7.8%, indicating Insteel Industries has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Insteel Industries’s debt level, has increased over the past 3 years from 11.7% to 14.5%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Insteel Industries gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Insteel Industries to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for IIIN’s future growth? Take a look at our free research report of analyst consensus for IIIN’s outlook.
- Financial Health: Are IIIN’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.
- 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 June 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.