When First United Corporation (NASDAQ:FUNC) announced its most recent earnings (30 June 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how First United performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see FUNC has performed. See our latest analysis for FUNC
Was FUNC’s recent earnings decline worse than the long-term trend and the industry?
To account for any quarterly or half-yearly updates, I 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 method allows me to assess many different companies in a uniform manner using new information. First United’s most recent bottom-line is $6M, which, relative to the prior year’s figure, has fallen by a large -45.18%. Given that these figures are relatively nearsighted, I have calculated an annualized five-year figure for FUNC’s net income, which stands at $3M. This shows that even though earnings declined against last year, over time, First United’s profits have been growing on average.
What’s enabled this growth? Let’s see if it is only due to industry tailwinds, or if First United has experienced some company-specific growth. Over the past few years, First United grew its bottom line faster than revenue by effectively controlling its costs. This has caused a margin expansion and profitability over time. Looking at growth from a sector-level, the US banks industry has been growing its average earnings by double-digit 12.54% over the prior year, and a less exciting 9.71% over the previous few years. This suggests that any uplift the industry is profiting from, First United has not been able to leverage it as much as its industry peers.
What does this mean?
First United’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies are profitable, but have volatile earnings, can have many factors impacting its business. I suggest you continue to research First United to get a more holistic view of the stock by looking at:
1. Financial Health: Is FUNC’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.