Where Sportsman’s Warehouse Holdings Inc’s (NASDAQ:SPWH) Earnings Growth Stands Against Its Industry
Measuring Sportsman’s Warehouse Holdings Inc’s (NASDAQ:SPWH) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess SPWH’s recent performance announced on 04 August 2018 and compare these figures to its historical trend and industry movements.
Check out our latest analysis for Sportsman’s Warehouse Holdings
Commentary On SPWH’s Past Performance
SPWH’s trailing twelve-month earnings (from 04 August 2018) of US$16.4m has declined by -28.8% compared to the previous year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -2.5%, indicating the rate at which SPWH is growing has slowed down. Why could this be happening? Well, let’s look at what’s occurring with margins and whether the entire industry is facing the same headwind.
Revenue growth in the last couple of years, has been positive, yet earnings growth has been deteriorating. This suggest that Sportsman’s Warehouse Holdings has been increasing expenses, which is hurting margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the US specialty retail industry has been growing, albeit, at a muted single-digit rate of 7.5% over the past year, and 6.4% over the past five. This growth is a median of profitable companies of 24 Specialty Retail companies in US including GameStop, Sports Direct International and Ceconomy. This means any tailwind the industry is enjoying, Sportsman’s Warehouse Holdings has not been able to reap as much as its industry peers.
In terms of returns from investment, Sportsman’s Warehouse Holdings has invested its equity funds well leading to a 30.0% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 7.1% is below the US Specialty Retail industry of 7.3%, indicating Sportsman’s Warehouse Holdings’s are utilized less efficiently. Though, its return on capital (ROC), which also accounts for Sportsman’s Warehouse Holdings’s debt level, has increased over the past 3 years from 19.1% to 24.4%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that face a drawn out period of reduction in earnings are going through some sort of reinvestment phase in order to keep up with the recent industry disruption and growth. You should continue to research Sportsman’s Warehouse Holdings to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SPWH’s future growth? Take a look at our free research report of analyst consensus for SPWH’s outlook.
Financial Health: Are SPWH’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 04 August 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 editorial-team@simplywallst.com.
