When Greif Inc (NYSE:GEF) announced its most recent earnings (31 October 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Greif performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see GEF has performed. Check out our latest analysis for Greif
How GEF fared against its long-term earnings performance and its industry
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 technique enables me to examine different companies in a uniform manner using the latest information. For Greif, its latest trailing-twelve-month earnings is $118.6M, which compared to the previous year’s level, has moved up by a non-trivial 58.34%. Since these values may be relatively nearsighted, I have computed an annualized five-year figure for GEF’s earnings, which stands at $120.7M. This suggests that, despite the fact that earnings growth from last year was positive, over the past couple of years, Greif’s earnings have been falling on average.
What could be happening here? Let’s examine what’s occurring with margins and if the rest of the industry is feeling the heat. Although revenue growth in the last few years, has been negative, earnings growth has been falling by even more, meaning Greif has been growing its expenses. This harms margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the US packaging industry has been growing, albeit, at a unexciting single-digit rate of 4.90% over the previous year, and 6.08% over the previous five years. This shows that whatever recent headwind the industry is facing, Greif is relatively better-cushioned than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook.
I suggest you continue to research Greif to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for GEF’s future growth? Take a look at our free research report of analyst consensus for GEF’s outlook.
2. Financial Health: Is GEF’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 October 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.