After looking at AirBoss of America Corp’s (TSE:BOS) latest earnings announcement (31 March 2018), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
Did BOS’s recent earnings growth beat the long-term trend and the industry?
BOS’s trailing twelve-month earnings (from 31 March 2018) of US$12.96m has increased by 4.85% compared to the previous year. However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 5.99%, indicating the rate at which BOS is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and if the whole industry is experiencing the hit as well.
In the past few years, revenue growth has fallen behind which implies that AirBoss of America’s bottom line has been driven by unsustainable cost-reductions. Looking at growth from a sector-level, the Canadian chemicals industry has been growing average earnings growth of 65.82% in the previous year, and a more subdued 7.47% over the past five years. This growth is a median of profitable companies of 4 Chemicals companies in CA including HTC Purenergy, Methanex and Nutrien. This shows that whatever uplift the industry is profiting from, AirBoss of America has not been able to reap as much as its industry peers.
In terms of returns from investment, AirBoss of America has not invested its equity funds well, leading to a 10.79% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 6.70% exceeds the CA Chemicals industry of 6.31%, indicating AirBoss of America has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for AirBoss of America’s debt level, has declined over the past 3 years from 13.89% to 8.00%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 12.72% to 56.61% over the past 5 years.
What does this mean?
AirBoss of America’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as AirBoss of America gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research AirBoss of America to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BOS’s future growth? Take a look at our free research report of analyst consensus for BOS’s outlook.
- Financial Health: Are BOS’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.
- 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.