Does Layne Christensen Company’s (LAYN) -22.4% EPS Decline Reflect A Long-Term Trend?
Examining Layne Christensen Company’s (NASDAQ:LAYN) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess LAYN’s latest performance announced on 31 July 2017 and compare these figures to its longer term trend and industry movements. View our latest analysis for Layne Christensen
Was LAYN’s recent earnings decline indicative of a tough track record?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This technique allows me to analyze many different companies on a more comparable basis, using the most relevant data points. Layne Christensen’s most recent earnings -$44M, which, in comparison to the previous year’s figure, has become more negative. Since these values may be somewhat short-term, I’ve estimated an annualized five-year value for Layne Christensen’s net income, which stands at -$50M. This shows that, although net income is negative, it has become less negative over the years.
We can further examine Layne Christensen’s loss by researching what’s going on in the industry along with within the company. Firstly, I want to quickly look into the line items. Revenue growth over last couple of years has been negative at -11.54%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Scanning growth from a sector-level, the US construction and engineering industry has been growing its average earnings by double-digit 22.80% in the prior twelve months, and a flatter 0.09% over the previous five years. This suggests that any tailwind the industry is deriving benefit from, Layne Christensen has not been able to reap as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will happen in the future and when. The most valuable step is to assess company-specific issues Layne Christensen may be facing and whether management guidance has consistently been met in the past. You should continue to research Layne Christensen to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for LAYN’s future growth? Take a look at our free research report of analyst consensus for LAYN’s outlook.
2. Financial Health: Is LAYN’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.
