Where K-Bro Linen Inc (TSX:KBL) Stands In Terms Of Earnings Growth Against Its Industry
Investors with a long-term horizong may find it valuable to assess K-Bro Linen Inc’s (TSX:KBL) 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 K-Bro Linen is currently performing. Check out our latest analysis for K-Bro Linen
Did KBL perform worse than its track record and industry?
To account for any quarterly or half-yearly updates, I 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 method allows me to examine many different companies on a more comparable basis, using the most relevant data points. K-Bro Linen’s most recent earnings is CA$9M, which compared to the prior year’s level, has declined by -22.87%. Since these figures may be relatively short-term thinking, I have computed an annualized five-year value for K-Bro Linen’s earnings, which stands at CA$10M. This doesn’t look much better, since earnings seem to have gradually been falling over time.
Why is this? Let’s examine what’s going on with margins and if the entire industry is feeling the heat. Over the past few years, revenue growth has been lagging behind which implies that K-Bro Linen’s bottom line has been propelled by unsustainable cost-reductions. Viewing growth from a sector-level, the Canadian commercial services and supplies industry has been growing, albeit, at a subdued single-digit rate of 2.45% over the prior twelve months, and 6.61% over the previous five years. This shows that whatever near-term headwind the industry is facing, it’s hitting K-Bro Linen harder than its peers.
What does this mean?
K-Bro Linen’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Typically companies that experience a prolonged period of diminishing earnings are going through some sort of reinvestment phase . Though if the entire industry is struggling to grow over time, it may be a signal of a structural shift, which makes K-Bro Linen and its peers a riskier investment. I recommend you continue to research K-Bro Linen to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for KBL’s future growth? Take a look at our free research report of analyst consensus for KBL’s outlook.
2. Financial Health: Is KBL’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.
