After looking at OMNOVA Solutions Inc’s (NYSE:OMN) latest earnings update (31 August 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. View our latest analysis for OMNOVA Solutions
How OMN fared against its long-term earnings performance and its industry
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 enables me to analyze many different companies on a more comparable basis, using new information. For OMNOVA Solutions, its most recent trailing-twelve-month earnings is -$6.1M, which compared to last year’s level, has become less negative. Since these figures may be relatively myopic, I’ve computed an annualized five-year value for OMNOVA Solutions’s net income, which stands at $19.5M.
We can further analyze OMNOVA Solutions’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years OMNOVA Solutions has seen an annual decline in revenue of -6.14%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Viewing growth from a sector-level, the US chemicals industry has been growing its average earnings by double-digit 13.71% over the previous twelve months, and a more subdued 4.26% over the last five years. This shows that, while OMNOVA Solutions is presently unprofitable, it may have gained from industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Though OMNOVA Solutions’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to predict what will occur going forward, and when. The most useful step is to assess company-specific issues OMNOVA Solutions may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research OMNOVA Solutions to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for OMN’s future growth? Take a look at our free research report of analyst consensus for OMN’s outlook.
- 2. Financial Health: Is OMN’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 trailing twelve months from 31 August 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.