Should Hurco Companies Inc’s (NASDAQ:HURC) Recent Earnings Decline Worry You?
Understanding how Hurco Companies Inc (NASDAQ:HURC) is performing as a company requires looking at more than just a years’ earnings. Today I will run you through a basic sense check to gain perspective on how Hurco Companies is doing by comparing its latest earnings with its long-term trend as well as the performance of its machinery industry peers. View our latest analysis for Hurco Companies
Was HURC weak performance lately part of a long-term decline?
I like to 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 examine different companies in a uniform manner using the latest information. “For Hurco Companies, its “, most recent earnings is $11.3M, which compared to the prior year’s level, has fallen by -24.41%. Given that these values are fairly short-term thinking, I have estimated an annualized five-year figure for HURC’s earnings, which stands at $11.9M. This doesn’t seem to paint a better picture, as earnings seem to have consistently been deteriorating over the longer term.
Why could this be happening? Let’s examine what’s transpiring with margins and whether the entire industry is experiencing the hit as well. Over the past few years, revenue growth has been lagging behind which implies that Hurco Companies’s bottom line has been driven by unmaintainable cost-reductions. Looking at growth from a sector-level, the US machinery industry has been growing its average earnings by double-digit 17.33% in the past year, and a less exciting 4.54% over the past couple of years. This means that any uplift the industry is enjoying, Hurco Companies has not been able to reap as much as its industry peers.
What does this mean?
Though Hurco Companies’s past data is helpful, it is only one aspect of my investment thesis. Generally companies that face an extended period of decline in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry growth and disruption. You should continue to research Hurco Companies to get a better picture of the stock by looking at:
1. Financial Health: Is HURC’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 HURC 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 HURC 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.
