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For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Ibstock plc (LSE:IBST) useful as an attempt to give more color around how Ibstock is currently performing. See our latest analysis for Ibstock
Commentary On IBST’s Past Performance
I use data from the most recent 12 months, 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 analyze different companies on a more comparable basis, using the latest information. For Ibstock, its most recent bottom-line (trailing twelve month) is UK£73.55M, which, relative to the prior year’s level, has dropped by -18.61%. Given that these figures are fairly nearsighted, I’ve determined an annualized five-year figure for Ibstock’s net income, which stands at UK£65.04M This shows that although earnings declined against the previous year, over time, Ibstock’s earnings have been rising on average.
How has it been able to do this? Well, let’s take a look at whether it is merely owing to an industry uplift, or if Ibstock has seen some company-specific growth. Over the past couple of years, Ibstock grew its bottom line faster than revenue by successfully controlling its costs. This resulted in a margin expansion and profitability over time. Looking at growth from a sector-level, the UK basic materials industry has been growing its average earnings by double-digit 24.96% over the past twelve months, and 17.68% over the past five years. This means whatever uplift the industry is benefiting from, Ibstock has not been able to leverage it as much as its average peer.
What does this mean?
Though Ibstock’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. You should continue to research Ibstock to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for IBST’s future growth? Take a look at our free research report of analyst consensus for IBST’s outlook.
2. Financial Health: Is IBST’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 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.