In this article, I will take a look at Photronics Inc’s (NASDAQ:PLAB) most recent earnings update (30 July 2017) and compare these latest figures against its performance over the past few years, along with how the rest of PLAB’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. See our latest analysis for PLAB
Was PLAB’s recent earnings decline indicative of a tough track record?
I like to 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 allows me to analyze different companies on a similar basis, using the latest information. For Photronics, the most recent bottom-line is $13M, which, against the prior year’s figure, has fallen by a large -78.19%. Given that these values may be somewhat nearsighted, I’ve estimated an annualized five-year figure for PLAB’s earnings, which stands at $29M. This doesn’t look much better, since earnings seem to have gradually been falling over time.
Why is this? Well, let’s look at what’s transpiring with margins and whether the rest of the industry is experiencing the hit as well. In the past couple of years, revenue growth has failed to keep up which indicates that Photronics’s bottom line has been propelled by unmaintainable cost-cutting. Looking at growth from a sector-level, the US semiconductors and semiconductor equipment industry has been growing its average earnings by double-digit 35.14% in the previous year, and a less exciting 3.31% over the past five years. This shows that whatever tailwind the industry is deriving benefit from, Photronics has not been able to realize the gains unlike its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that face a prolonged period of decline in earnings are going through some sort of reinvestment phase in order to keep up with the recent industry growth and disruption. I suggest you continue to research Photronics to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for PLAB’s future growth? Take a look at our free research report of analyst consensus for PLAB’s outlook.
2. Financial Health: Is PLAB’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.