After looking at Canterbury Park Holding Corporation’s (NASDAQ:CPHC) latest earnings update (31 March 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. View out our latest analysis for Canterbury Park Holding
Could CPHC beat the long-term trend and outperform its industry?
CPHC’s trailing twelve-month earnings (from 31 March 2018) of US$4.57m has increased by 3.85% compared to the previous year. However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 30.65%, indicating the rate at which CPHC is growing has slowed down. Why could this be happening? Well, let’s look at what’s occurring with margins and if the rest of the industry is facing the same headwind.
In the last few years, revenue growth has fallen behind which indicates that Canterbury Park Holding’s bottom line has been driven by unmaintainable cost-reductions. Scanning growth from a sector-level, the US hospitality industry has been growing its average earnings by double-digit 16.29% in the prior twelve months, and 11.97% over the last five years. This shows that any tailwind the industry is enjoying, Canterbury Park Holding has not been able to gain as much as its average peer.
In terms of returns from investment, Canterbury Park Holding has not invested its equity funds well, leading to a 10.90% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 8.02% exceeds the US Hospitality industry of 6.96%, indicating Canterbury Park Holding has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Canterbury Park Holding’s debt level, has increased over the past 3 years from 9.19% to 10.89%.
What does this mean?
Canterbury Park Holding’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Canterbury Park Holding to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CPHC’s future growth? Take a look at our free research report of analyst consensus for CPHC’s outlook.
- Financial Health: Is CPHC’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 31 March 2018. 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.