Onex Corporation (TSE:ONEX): Does -92% Earnings Drop In A Year Reflect The Long-Term Trend?
In this commentary, I will examine Onex Corporation’s (TSX:ONEX) latest earnings update (30 September 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the diversified financial industry performed. As an investor, I find it beneficial to assess ONEX’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 Onex
Commentary On ONEX’s Past Performance
For the most up-to-date info, I use data from the most recent 12 months, 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 technique enables me to examine different companies in a uniform manner using the most relevant data points. For Onex, its latest twelve-month earnings is -$1,182.0M, which, in comparison to last year’s figure, has become more negative. Given that these figures are fairly short-term thinking, I’ve estimated an annualized five-year value for ONEX’s net income, which stands at -$627.4M. This doesn’t look much better, as earnings seem to have gradually been getting more and more negative over time.
We can further analyze Onex’s loss by looking at what has been happening in the industry as well as within the company. Initially, I want to briefly look into the line items. Revenue growth over the last few years has been fairly subdued, remaining flat on average at -1.02%. Given that top-line growth is also pretty stale the key to profitability in the future would be managing costs. Looking at growth from a sector-level, the Canadian diversified financial industry has been enduring some headwinds in the prior year, leading to an average earnings drop of -19.07%. This is a major change, given that the industry has constantly been delivering a a notable growth of 13.56% in the past couple of years. This shows that any near-term headwind the industry is facing, it’s hitting Onex harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will happen in the future and when. The most valuable step is to assess company-specific issues Onex may be facing and whether management guidance has regularly been met in the past. You should continue to research Onex to get a better picture of the stock by looking at:
1. Financial Health: Is ONEX’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 ONEX 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 ONEX 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.
