For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Photronics, Inc. (NASDAQ:PLAB) useful as an attempt to give more color around how Photronics is currently performing.
Was PLAB's recent earnings decline indicative of a tough track record?
PLAB's trailing twelve-month earnings (from 28 July 2019) of US$33m has declined by -6.5% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -1.4%, indicating the rate at which PLAB is growing has slowed down. Why could this be happening? Well, let's look at what's going on with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Photronics has fallen short of achieving a 20% return on equity (ROE), recording 4.9% instead. Furthermore, its return on assets (ROA) of 2.7% is below the US Semiconductor industry of 7.9%, indicating Photronics's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Photronics’s debt level, has declined over the past 3 years from 8.3% to 5.1%.
What does this mean?
Photronics's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. I recommend you continue to research Photronics to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PLAB’s future growth? Take a look at our free research report of analyst consensus for PLAB’s outlook.
- Financial Health: Are PLAB’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 28 July 2019. This may not be consistent with full year annual report figures.
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