Understanding CSP Inc’s (NASDAQ:CSPI) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how CSP is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. Check out our latest analysis for CSP
Did CSPI perform worse than its track record and industry?
To account for any quarterly or half-yearly updates, I 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 method enables me to analyze different stocks on a more comparable basis, using the most relevant data points. For CSP, its most recent earnings (trailing twelve month) is US$247.00K, which compared to last year’s figure, has sunken by a substantial -88.22%. Given that these figures are somewhat myopic, I have computed an annualized five-year value for CSPI’s net income, which stands at US$1.69M This doesn’t look much better, as earnings seem to have steadily been deteriorating over time.
What could be happening here? Well, let’s look at what’s going on with margins and if the whole industry is feeling the heat. Revenue growth over the last few years, has been positive, yet earnings growth has been declining. This implies that CSP has been ramping up expenses, which is harming margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US it industry has been growing its average earnings by double-digit 15.78% in the previous twelve months, and 11.93% over the past half a decade. This suggests that any uplift the industry is enjoying, CSP has not been able to leverage it as much as its average peer.
What does this mean?
Though CSP’s past data is helpful, it is only one aspect of my investment thesis. In some cases, companies that endure a drawn out period of diminishing earnings are undergoing some sort of reinvestment phase in order to keep up with the latest industry disruption and expansion. You should continue to research CSP to get a more holistic view of the stock by looking at:
Financial Health: Is CSPI’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.
Valuation: What is CSPI 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 CSPI is currently mispriced by the market.
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 31 March 2018. 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.