Was Gulf Resources Inc’s (GURE) EPS Decline A Part Of Broader Industry Downturn?
Today I will take a look at Gulf Resources Inc’s (NASDAQ:GURE) most recent earnings update (30 September 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the chemicals industry performed. As an investor, I find it beneficial to assess GURE’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. View our latest analysis for Gulf Resources
Commentary On GURE’s Past Performance
I prefer 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 technique allows me to assess various companies on a similar basis, using the most relevant data points. Gulf Resources’s latest earnings is $31.3M, which, against last year’s level, has fallen by -16.49%. Given that these figures may be somewhat short-term, I’ve computed an annualized five-year figure for GURE’s net income, which stands at $28.9M. This means while earnings growth was negative from the prior year, over the long run, Gulf Resources’s earnings have been rising on average.
What’s the driver of this growth? Well, let’s take a look at if it is solely due to an industry uplift, or if Gulf Resources has experienced some company-specific growth. Although both top-line and bottom-line growth rates in the last few years, were, on average, negative, earnings were more so. While this brought about a margin contraction, it has moderated Gulf Resources’s earnings contraction. Looking at growth from a sector-level, the US chemicals industry has been growing its average earnings by double-digit 14.01% over the previous twelve months, and a more muted 5.34% over the previous five years. This means that whatever uplift the industry is benefiting from, Gulf Resources has not been able to realize the gains unlike its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies are profitable, but have unpredictable earnings, can have many factors impacting its business. I suggest you continue to research Gulf Resources to get a more holistic view of the stock by looking at:
1. Financial Health: Is GURE’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 GURE 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 GURE 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.
