In this commentary, I will examine Citizens & Northern Corporation’s (NASDAQ:CZNC) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the banks industry performed. As an investor, I find it beneficial to assess CZNC’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. Check out our latest analysis for Citizens & Northern
Commentary On CZNC’s Past Performance
I like to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This allows me to assess many different companies on a similar basis, using new information. For Citizens & Northern, its most recent bottom-line (trailing twelve month) is US$13.37M, which, relative to last year’s level, has fallen by -14.75%. Given that these figures may be fairly nearsighted, I’ve calculated an annualized five-year figure for Citizens & Northern’s net income, which stands at US$18.51M This doesn’t seem to paint a better picture, since earnings seem to have gradually been falling over the longer term.
Why is this? Well, let’s look at what’s transpiring with margins and whether the rest of the industry is feeling the heat. Although revenue growth over the past couple of years, has been negative, earnings growth has been declining by even more, meaning Citizens & Northern has been growing its expenses. This hurts margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the US banks industry has been growing, albeit, at a subdued single-digit rate of 3.75% over the prior twelve months, and 8.14% over the past half a decade. This means that whatever near-term headwind the industry is enduring, it’s hitting Citizens & Northern harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that face an extended period of diminishing earnings are undergoing some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a indicator of a structural change, which makes Citizens & Northern and its peers a riskier investment. I recommend you continue to research Citizens & Northern to get a better picture of the stock by looking at:
- Financial Health: Is CZNC’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.
- Valuation: What is CZNC 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 CZNC is currently mispriced by the market.
- 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.