Where Taro Pharmaceutical Industries Ltd (NYSE:TARO) Stands In Terms Of Earnings Growth Against Its Industry
Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Taro Pharmaceutical Industries Ltd’s (NYSE:TARO) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. Check out our latest analysis for Taro Pharmaceutical Industries
Was TARO’s weak performance lately a part of a long-term decline?
For the most up-to-date info, I use data from the most recent 12 months, 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 enables me to analyze many different companies in a uniform manner using the latest information. For Taro Pharmaceutical Industries, its most recent bottom-line (trailing twelve month) is US$208.13M, which, against the prior year’s figure, has declined by a substantial -57.41%. Given that these values may be somewhat myopic, I have created an annualized five-year figure for Taro Pharmaceutical Industries’s earnings, which stands at US$346.87M This doesn’t seem to paint a better picture, as earnings seem to have gradually been diminishing over time.
Why could this be happening? Well, let’s look at what’s going on with margins and if the rest of the industry is facing the same headwind. Over the last few years, revenue growth has been lagging behind which indicates that Taro Pharmaceutical Industries’s bottom line has been driven by unmaintainable cost-cutting. Viewing growth from a sector-level, the US pharmaceuticals industry has been growing, albeit, at a subdued single-digit rate of 7.65% in the past twelve months, and a substantial 11.55% over the past five. This suggests that whatever tailwind the industry is enjoying, Taro Pharmaceutical Industries has not been able to reap as much as its average peer.
What does this mean?
Though Taro Pharmaceutical Industries’s past data is helpful, it is only one aspect of my investment thesis. Usually companies that endure an extended period of diminishing earnings are going through some sort of reinvestment phase with the aim of keeping up with the latest industry expansion and disruption. I suggest you continue to research Taro Pharmaceutical Industries to get a more holistic view of the stock by looking at:
1. Financial Health: Is TARO’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. Valuation: What is TARO worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether TARO is currently mispriced by the market.
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.
