After reading First Capital Inc’s (NASDAQ:FCAP) most recent earnings announcement (30 September 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether First Capital’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. View our latest analysis for First Capital
Could FCAP beat the long-term trend and outperform its industry?
For the purpose of this commentary, 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 method allows me to assess many different companies on a similar basis, using the most relevant data points. “For First Capital, its “, latest twelve-month earnings is $7.6M, which, relative to the previous year’s figure, has risen by 21.90%. Since these figures are fairly myopic, I’ve computed an annualized five-year value for FCAP’s earnings, which stands at $5.1M. This suggests that, generally, First Capital has been able to increasingly raise its bottom line over the past couple of years as well.
What’s enabled this growth? Well, let’s take a look at if it is solely owing to an industry uplift, or if First Capital has experienced some company-specific growth. In the last couple of years, First Capital grew its bottom line faster than revenue by efficiently controlling its costs. This has led to a margin expansion and profitability over time. Viewing growth from a sector-level, the US thrifts and mortgage finance industry has been growing its average earnings by double-digit 11.49% in the previous twelve months, and 14.84% over the previous few years. This means any uplift the industry is profiting from, First Capital is capable of leveraging this to its advantage.
What does this mean?
First Capital’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? You should continue to research First Capital to get a more holistic view of the stock by looking at:
1. Financial Health: Is FCAP’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 FCAP 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 FCAP 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.