After reading Forterra Inc’s (NASDAQ:FRTA) most recent earnings announcement (31 December 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Forterra’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. Check out our latest analysis for Forterra
Did FRTA’s recent earnings growth beat 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 latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to analyze different stocks in a uniform manner using new information. For Forterra, its latest trailing-twelve-month earnings is -US$2.06M, which, in comparison to the previous year’s figure, has become less negative. Since these figures are relatively short-term thinking, I’ve determined an annualized five-year figure for Forterra’s net income, which stands at -US$51.06M. This shows that, although net income is negative, it has become less negative over the years.
We can further evaluate Forterra’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Forterra’s top-line has risen by 26.20% on average, signalling that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Looking at growth from a sector-level, the US basic materials industry has been growing, albeit, at a muted single-digit rate of 2.18% over the prior year, and a substantial 11.50% over the last five years. This shows that even though Forterra is currently loss-making, any near-term headwind the industry is experiencing, Forterra is relatively better-cushioned than its peers.
What does this mean?
Though Forterra’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to predict what will happen in the future and when. The most insightful step is to assess company-specific issues Forterra may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Forterra to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for FRTA’s future growth? Take a look at our free research report of analyst consensus for FRTA’s outlook.
- 2. Financial Health: Is FRTA’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 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.