Want To Invest In Deltic Timber Corporation (NYSE:DEL)? Here’s How It Performed Lately
When Deltic Timber Corporation’s (NYSE:DEL) announced its latest earnings (31 December 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Deltic Timber’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not DEL actually performed well. Below is a quick commentary on how I see DEL has performed. View our latest analysis for Deltic Timber
Was DEL’s recent earnings decline indicative of a tough track record?
For the purpose of this commentary, I like to 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 blend enables me to examine different companies on a similar basis, using new information. For Deltic Timber, its most recent trailing-twelve-month earnings is US$6.49M, which compared to the previous year’s level, has plunged by -28.92%. Since these figures may be relatively short-term, I’ve created an annualized five-year figure for Deltic Timber’s earnings, which stands at US$11.03M This doesn’t seem to paint a better picture, as earnings seem to have consistently been deteriorating over time.
Why could this be happening? Well, let’s take a look at what’s occurring with margins and whether the entire industry is experiencing the hit as well. Revenue growth in the past few years, has been positive, yet earnings growth has been deteriorating. This implies that Deltic Timber 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 forestry industry has been growing its average earnings by double-digit 13.92% over the prior year, and 16.46% over the past half a decade. This shows that whatever uplift the industry is enjoying, Deltic Timber has not been able to gain as much as its average peer.
What does this mean?
Though Deltic Timber’s past data is helpful, it is only one aspect of my investment thesis. Typically companies that face an extended period of decline in earnings are undergoing some sort of reinvestment phase in order to keep up with the latest industry growth and disruption. You should continue to research Deltic Timber to get a better picture of the stock by looking at:
1. Financial Health: Is DEL’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. Valuation: What is DEL 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 DEL is currently mispriced by the market.
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 31 December 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.
