After reading Flexible Solutions International Inc.'s (AMEX:FSI) most recent earnings announcement (30 September 2019), 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 Flexible Solutions International's performance has been impacted by industry movements. In this article I briefly touch on my key findings.
How Did FSI's Recent Performance Stack Up Against Its Past?
FSI's trailing twelve-month earnings (from 30 September 2019) of US$1.2m has declined by -0.8% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 1.2%, indicating the rate at which FSI is growing has slowed down. Why is this? Well, let's look at what's occurring with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Flexible Solutions International has fallen short of achieving a 20% return on equity (ROE), recording 7.9% instead. Furthermore, its return on assets (ROA) of 4.5% is below the US Chemicals industry of 6.9%, indicating Flexible Solutions International's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Flexible Solutions International’s debt level, has declined over the past 3 years from 25% to 9.1%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 22% to 33% over the past 5 years.
What does this mean?
Flexible Solutions International's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Usually companies that experience a prolonged period of reduction in earnings are going through some sort of reinvestment phase Though if the entire industry is struggling to grow over time, it may be a indicator of a structural change, which makes Flexible Solutions International and its peers a higher risk investment. You should continue to research Flexible Solutions International to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FSI’s future growth? Take a look at our free research report of analyst consensus for FSI’s outlook.
- Financial Health: Are FSI’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 30 September 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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