Investors with a long-term horizong may find it valuable to assess Summer Infant Inc’s (NASDAQ:SUMR) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Summer Infant is currently performing. Check out our latest analysis for Summer Infant
Was SUMR’s recent earnings decline worse than the long-term trend and the industry?
I like to use 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 technique allows me to assess different stocks on a more comparable basis, using new information. For Summer Infant, the most recent bottom-line -$5M, which, in comparison to last year’s level, has become more negative. Given that these figures are relatively nearsighted, I’ve computed an annualized five-year figure for SUMR’s net income, which stands at -$11M. This means while net income is negative, it has become less negative over the years.
Additionally, we can assess Summer Infant’s loss by looking at what’s going on in the industry along with within the company. First, I want to briefly look into the line items. Revenue growth over last few years has been negative at -2.89%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Looking at growth from a sector-level, the US leisure products industry has been growing its average earnings by double-digit 13.53% in the prior year, and 17.36% over the previous five years. This means whatever tailwind the industry is deriving benefit from, Summer Infant has not been able to realize the gains unlike its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most valuable step is to examine company-specific issues Summer Infant may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Summer Infant to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for SUMR’s future growth? Take a look at our free research report of analyst consensus for SUMR’s outlook.
2. Financial Health: Is SUMR’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.