In this commentary, I will examine Nathan’s Famous Inc’s (NASDAQ:NATH) latest earnings update (24 September 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the hospitality industry performed. As an investor, I find it beneficial to assess NATH’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 Nathan’s Famous
How Well Did NATH Perform?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, 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 examine different companies on a similar basis, using the latest information. For Nathan’s Famous, the most recent earnings is $7.5M, which compared to last year’s level, has increased by a somewhat subdued 6.72%. Given that these values may be somewhat nearsighted, I have created an annualized five-year value for Nathan’s Famous’s net income, which stands at $7.3M. This means generally, Nathan’s Famous has been able to steadily improve its earnings over the last few years as well.
How has it been able to do this? Well, let’s take a look at if it is merely attributable to an industry uplift, or if Nathan’s Famous has seen some company-specific growth. The hike in earnings seems to be driven by a solid top-line increase beating its growth rate of costs. Though this brought about a margin contraction, it has made Nathan’s Famous more profitable. Looking at growth from a sector-level, the US hospitality industry has been growing its average earnings by double-digit 13.82% in the prior twelve months, and 11.05% over the past five years. This means that any tailwind the industry is profiting from, Nathan’s Famous has not been able to leverage it as much as its average peer.
What does this mean?
Though Nathan’s Famous’s past data is helpful, it is only one aspect of my investment thesis. 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 Nathan’s Famous to get a better picture of the stock by looking at:
1. Financial Health: Is NATH’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 NATH 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 NATH 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.