When The Container Store Group Inc (NYSE:TCS) announced its most recent earnings (30 June 2018), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Container Store Group performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see TCS has performed.
How TCS fared against its long-term earnings performance and its industry
TCS recently turned a profit of US$20.3m (most recent trailing twelve-months) compared to its average loss of -US$13.1m over the past five years.
Over the past few years, Container Store Group expanded its bottom line faster than revenue by successfully controlling its costs. This resulted in a margin expansion and profitability over time. Scanning growth from a sector-level, the US specialty retail industry has been growing, albeit, at a muted single-digit rate of 8.1% over the prior twelve months, and 7.3% over the past half a decade. This growth is a median of profitable companies of 25 Specialty Retail companies in US including GameStop, Sports Direct International and Francesca’s Holdings. This suggests that any tailwind the industry is deriving benefit from, Container Store Group is able to amplify this to its advantage.
In terms of returns from investment, Container Store Group has fallen short of achieving a 20% return on equity (ROE), recording 8.6% instead. Furthermore, its return on assets (ROA) of 6.5% is below the US Specialty Retail industry of 7.2%, indicating Container Store Group’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Container Store Group’s debt level, has increased over the past 3 years from 3.4% to 4.1%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 573% to 127% over the past 5 years.
What does this mean?
Container Store Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as Container Store Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Container Store Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TCS’s future growth? Take a look at our free research report of analyst consensus for TCS’s outlook.
- Financial Health: Are TCS’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 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.