When Ever-Glory International Group Inc (NASDAQ:EVK) announced its most recent earnings (30 September 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Ever-Glory International Group has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see EVK has performed. See our latest analysis for Ever-Glory International Group
Did EVK’s recent earnings growth beat the long-term trend and the industry?
For the most up-to-date info, I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique enables me to analyze various companies on a more comparable basis, using new information. “For Ever-Glory International Group, its “, most recent bottom-line is $10.3M, which, relative to last year’s level, has moved up by 25.52%. Given that these values are somewhat nearsighted, I have computed an annualized five-year figure for EVK’s net income, which stands at $11.2M. This suggests that, while earnings growth from last year was positive, over the longer term, Ever-Glory International Group’s earnings have been waning on average.
Why could this be happening? Well, let’s look at what’s occurring with margins and whether the rest of the industry is experiencing the hit as well. Revenue growth over the past few years, has been positive, yet earnings growth has been falling. This means Ever-Glory International Group has been growing expenses, which is harming margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the US luxury industry has been growing, albeit, at a subdued single-digit rate of 7.24% over the previous year, and 6.14% over the past couple of years. This suggests that whatever uplift the industry is gaining from, Ever-Glory International Group is able to leverage this to its advantage.
What does this mean?
Ever-Glory International Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be factors that are affecting the entire industry hence the high industry growth rate over the same time period. I suggest you continue to research Ever-Glory International Group to get a more holistic view of the stock by looking at:
1. Financial Health: Is EVK’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. Valuation: What is EVK worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether EVK is currently mispriced by the market.
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.