After looking at SORL Auto Parts Inc’s (NASDAQ:SORL) latest earnings announcement (30 September 2017), 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. View our latest analysis for SORL Auto Parts
How Did SORL’s Recent Performance Stack Up Against Its Past?
For the most up-to-date info, I use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This technique allows me to examine different stocks on a similar basis, using new information. For SORL Auto Parts, the latest earnings is $29.7M, which, in comparison to the prior year’s figure, has moved up by a significant 76.46%. Since these values may be relatively nearsighted, I’ve determined an annualized five-year value for SORL’s net income, which stands at $15.6M. This means that, on average, SORL Auto Parts has been able to consistently grow its earnings over the past couple of years as well.
What’s the driver of this growth? Let’s take a look at if it is only a result of an industry uplift, or if SORL Auto Parts has seen some company-specific growth. The rise in earnings seems to be bolstered by a robust top-line increase overtaking its growth rate of expenses. Though this resulted in a margin contraction, it has made SORL Auto Parts more profitable. Eyeballing growth from a sector-level, the US auto components industry has been growing its average earnings by double-digit 14.66% in the prior twelve months, and 12.03% over the past five. This means that whatever uplift the industry is gaining from, SORL Auto Parts is capable of leveraging this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research SORL Auto Parts to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for SORL’s future growth? Take a look at our free research report of analyst consensus for SORL’s outlook.
2. Financial Health: Is SORL’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.