Does Bombardier Inc's (TSE:BBD.B) Earnings Growth Make It An Outperformer?

Understanding Bombardier Inc's (TSX:BBD.B) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Bombardier is doing by evaluating its latest earnings with its longer term trend as well as its industry peers' performance over the same period. Check out our latest analysis for Bombardier

Could BBD.B beat the long-term trend and outperform its industry?

I like to use the ‘latest twelve-month’ data, 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 enables me to examine many different companies on a similar basis, using new information. For Bombardier, its most recent bottom-line (trailing twelve month) is -US$543.00M, which, in comparison to the prior year's level, has become less negative. Given that these figures are fairly myopic, I have calculated an annualized five-year figure for Bombardier's net income, which stands at -US$1.03B. This means that, while net income is negative, it has become less negative over the years.

We can further assess Bombardier's loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Bombardier has seen an annual decline in revenue of -2.06%, on average. This adverse movement is a driver of the company's inability to reach breakeven. Has the entire industry experienced this headwind? Looking at growth from a sector-level, the Canadian aerospace & defense industry has been growing its average earnings by double-digit 25.62% over the previous year, and a more subdued 4.55% over the past five. This means that, though Bombardier is presently running a loss, it may have gained from industry tailwinds, moving earnings in the right direction.

What does this mean?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to envisage what will happen in the future and when. The most insightful step is to assess company-specific issues Bombardier may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Bombardier to get a more holistic view of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for BBD.B’s future growth? Take a look at our free research report of analyst consensus for BBD.B’s outlook.
• 2. Financial Health: Is BBD.B’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 trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.