Today I will examine Severn Bancorp Inc’s (NASDAQ:SVBI) latest earnings update (30 September 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of SVBI’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. Check out our latest analysis for Severn Bancorp
Despite a decline, did SVBI underperform the long-term trend and the industry?
For the most up-to-date info, I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method enables me to assess different stocks on a more comparable basis, using the latest information. For Severn Bancorp, the most recent earnings is $4M, which compared to the prior year’s figure, has taken a dive by a significant -72.15%. Since these figures are fairly short-term, I’ve determined an annualized five-year figure for SVBI’s earnings, which stands at -$1M. This means that though earnings declined against the prior year, over a longer period of time, Severn Bancorp’s profits have been increasing on average.
What’s enabled this growth? Let’s see if it is solely owing to an industry uplift, or if Severn Bancorp has experienced some company-specific growth. Over the last few years, Severn Bancorp 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 US thrifts and mortgage finance industry has been growing its average earnings by double-digit 13.21% in the previous twelve months, and 15.72% over the previous few years. This means that whatever tailwind the industry is deriving benefit from, Severn Bancorp has not been able to leverage it as much as its industry peers.
What does this mean?
Though Severn Bancorp’s past data is helpful, it is only one aspect of my investment thesis. Companies are profitable, but have unpredictable earnings, can have many factors influencing its business. You should continue to research Severn Bancorp to get a better picture of the stock by looking at:
1. Financial Health: Is SVBI’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. 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.