Measuring Graham Corporation’s (NYSE:GHM) track record of past performance is a useful exercise for investors. It enables us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess GHM’s recent performance announced on 30 September 2017 and weigh these figures against its long-term trend and industry movements. Check out our latest analysis for Graham
Commentary On GHM’s Past Performance
I prefer to 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 method enables me to analyze different stocks in a uniform manner using new information. For Graham, its most recent bottom-line (trailing twelve month) is $4.6M, which, against last year’s figure, has jumped up by 44.40%. Given that these figures may be relatively short-term thinking, I have determined an annualized five-year figure for Graham’s net income, which stands at $9.2M. This means that, despite the fact that earnings growth from last year was positive, over a longer period of time, Graham’s earnings have been diminishing on average.
Why is this? Let’s examine what’s transpiring with margins and if the whole industry is facing the same headwind. Although revenue growth over the last couple of years, has been negative, earnings growth has been deteriorating by even more, meaning Graham has been ramping up its expenses. This hurts margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US machinery industry has been growing its average earnings by double-digit 14.73% over the previous year, and a more subdued 3.64% over the past half a decade. This means any uplift the industry is benefiting from, Graham is able to amplify this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There could be variables that are affecting the industry as a whole, hence the high industry growth rate over the same period of time. I recommend you continue to research Graham to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for GHM’s future growth? Take a look at our free research report of analyst consensus for GHM’s outlook.
- 2. Financial Health: Is GHM’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 30 September 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.