For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at Fuling Global Inc’s (NASDAQ:FORK) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. View our latest analysis for Fuling Global
Did FORK perform worse than its track record and industry?
I like to use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This blend allows me to examine different stocks on a similar basis, using new information. For Fuling Global, its latest trailing-twelve-month earnings is US$6.28M, which, in comparison to last year’s figure, has plunged by -20.97%. Since these figures may be fairly short-term thinking, I have computed an annualized five-year value for Fuling Global’s earnings, which stands at US$7.28M This doesn’t seem to paint a better picture, since earnings seem to have consistently been declining over time.
Why could this be happening? Let’s examine what’s transpiring with margins and if the entire industry is facing the same headwind. Revenue growth in the last few years, has been positive, however, earnings growth has been lagging behind meaning Fuling Global has been ramping up its expenses by a lot more. This hurts margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the US consumer durables industry has been growing its average earnings by double-digit 12.12% over the previous year, and 17.69% over the past five. This suggests that any uplift the industry is profiting from, Fuling Global has not been able to gain as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that face a prolonged period of decline in earnings are going through some sort of reinvestment phase in order to keep up with the latest industry disruption and growth. I recommend you continue to research Fuling Global to get a more holistic view of the stock by looking at:
- Financial Health: Is FORK’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 31 December 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.