After looking at PennyMac Mortgage Investment Trust’s (NYSE:PMT) latest earnings announcement (30 September 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. 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 PennyMac Mortgage Investment Trust’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for PennyMac Mortgage Investment Trust
Did PMT beat its long-term earnings growth trend and its industry?
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method enables me to analyze different companies on a similar basis, using the latest information. “For PennyMac Mortgage Investment Trust, its “, most recent earnings is $98.0M, which, relative to last year’s level, has jumped by an impressive 66.12%. Given that these figures may be relatively short-term, I’ve determined an annualized five-year figure for PMT’s earnings, which stands at $115.6M. This means while earnings growth from last year was positive, over time, PennyMac Mortgage Investment Trust’s earnings have been declining on average.
Why is this? Well, let’s look at what’s going on with margins and whether the entire industry is feeling the heat. Revenue growth in the last few years, has been positive, however, earnings growth has been lagging behind meaning PennyMac Mortgage Investment Trust has been ramping up its expenses by a lot more. This hurts margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the US mortgage reits industry has been growing its average earnings by double-digit 27.80% over the previous twelve months, . This is a change from a volatile drop of -2.55% in the previous few years. This means that, in the recent industry expansion, PennyMac Mortgage Investment Trust is capable of amplifying this to its advantage.
What does this mean?
PennyMac Mortgage Investment Trust’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be factors that are influencing the entire industry hence the high industry growth rate over the same time period. I recommend you continue to research PennyMac Mortgage Investment Trust to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for PMT’s future growth? Take a look at our free research report of analyst consensus for PMT’s outlook.
2. Financial Health: Is PMT’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 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.