How Orient Paper Inc’s (NYSEMKT:ONP) Recent Earnings Fared Against The Long Term Trend
Understanding how Orient Paper Inc (AMEX:ONP) is performing as a company requires looking at more than just a years’ earnings. Today I will run you through a basic sense check to gain perspective on how Orient Paper is doing by comparing its latest earnings with its long-term trend as well as the performance of its paper and forest products industry peers. View our latest analysis for Orient Paper
Was ONP’s weak performance lately a part of a long-term decline?
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, 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 method allows me to analyze many different companies in a uniform manner using the latest information. “For Orient Paper, its “, most recent earnings is $6.4M, which, relative to the previous year’s level, has dropped by -0.56%. Given that these figures are fairly short-term thinking, I’ve estimated an annualized five-year value for Orient Paper’s earnings, which stands at $13.1M. This shows that Orient Paper’s average annual net income has previously been bigger, which signifies a downward trend in the bottom line.
Why could this be happening? Well, let’s examine what’s going on with margins and if the entire industry is experiencing the hit as well. Although revenue growth in the past few years, has been negative, earnings growth has been declining by even more, meaning Orient Paper has been growing its expenses. This hurts margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US paper and forest products industry has been growing, albeit, at a unexciting single-digit rate of 3.55% over the past twelve months, and a substantial 10.46% over the past five years. This suggests that any near-term headwind the industry is enduring, it’s hitting Orient Paper harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that experience a drawn out period of diminishing earnings are undergoing some sort of reinvestment phase . However, if the entire industry is struggling to grow over time, it may be a signal of a structural shift, which makes Orient Paper and its peers a riskier investment. You should continue to research Orient Paper to get a better picture of the stock by looking at:
1. Financial Health: Is ONP’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 ONP 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 ONP 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.
