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Pets at Home Group Plc (LON:PETS): Should The Recent Earnings Drop Worry You?

Today I will take a look at Pets at Home Group Plc’s (LSE:PETS) most recent earnings update (12 October 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the specialty retail industry performed. As an investor, I find it beneficial to assess PETS’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. See our latest analysis for Pets at Home Group

How Did PETS’s Recent Performance Stack Up Against Its Past?

I look at 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 blend allows me to assess different companies in a uniform manner using the most relevant data points. For Pets at Home Group, its most recent earnings (trailing twelve month) is UK£71.69M, which, against last year’s level, has plunged by -6.45%. Since these values may be somewhat short-term thinking, I have computed an annualized five-year value for PETS’s earnings, which stands at UK£44.22M This means even though earnings declined against the previous year, over time, Pets at Home Group’s earnings have been rising on average.

LSE:PETS Income Statement Feb 21st 18
LSE:PETS Income Statement Feb 21st 18

What’s the driver of this growth? Let’s see whether it is only a result of industry tailwinds, or if Pets at Home Group has experienced some company-specific growth. In the last couple of years, Pets at Home Group expanded its bottom line faster than revenue by successfully controlling its costs. This has caused a margin expansion and profitability over time. Inspecting growth from a sector-level, the UK specialty retail industry has been growing, albeit, at a muted single-digit rate of 5.58% over the prior year, and a substantial 10.93% over the previous five years. This suggests that whatever tailwind the industry is benefiting from, Pets at Home Group has not been able to reap as much as its industry peers.

What does this mean?

Though Pets at Home Group’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I recommend you continue to research Pets at Home Group to get a more holistic view of the stock by looking at:

  • 1. Future Outlook: What are well-informed industry analysts predicting for PETS’s future growth? Take a look at our free research report of analyst consensus for PETS’s outlook.

  • 2. Financial Health: Is PETS’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 12 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.