Examining Ceapro Inc’s (TSXV:CZO) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess CZO’s latest performance announced on 30 September 2017 and weight these figures against its longer term trend and industry movements. Check out our latest analysis for Ceapro
Was CZO’s recent earnings decline worse than the long-term trend and the industry?
I like to 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 allows me to examine different companies on a similar basis, using the most relevant data points. For Ceapro, the most recent bottom-line is CA$1M, which, relative to the prior year’s level, has declined by a significant -88.35%. Given that these values may be relatively nearsighted, I have computed an annualized five-year value for Ceapro’s earnings, which stands at CA$2M. This doesn’t look much better, as earnings seem to have steadily been diminishing over the longer term.What could be happening here? Well, let’s look at what’s transpiring with margins and whether the rest of the industry is feeling the heat. In the past couple of years, revenue growth has been lagging behind which implies that Ceapro’s bottom line has been propelled by unmaintainable cost-reductions. Inspecting growth from a sector-level, the Canadian chemicals industry has been enduring severe headwinds over the prior year, leading to an average earnings drop of -33.38%. This is a significant change, given that the industry has been delivering a positive rate of 2.44%, on average, over the previous five years. This means that any recent headwind the industry is facing, it’s hitting Ceapro harder than its peers.
What does this mean?
Ceapro’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Typically companies that face a drawn out period of diminishing earnings are undergoing some sort of reinvestment phase . Although, if the entire industry is struggling to grow over time, it may be a signal of a structural change, which makes Ceapro and its peers a higher risk investment. I recommend you continue to research Ceapro to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for CZO’s future growth? Take a look at our free research report of analyst consensus for CZO’s outlook.
2. Financial Health: Is CZO’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.