Should CanWel Building Materials Group Ltd's (TSE:CWX) Recent Earnings Decline Worry You?

Investors with a long-term horizong may find it valuable to assess CanWel Building Materials Group Ltd's (TSX:CWX) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how CanWel Building Materials Group is currently performing. Check out our latest analysis for CanWel Building Materials Group

Was CWX's recent earnings decline indicative of a tough track record?

I look at the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method enables me to assess different companies on a similar basis, using new information. For CanWel Building Materials Group, its most recent bottom-line (trailing twelve month) is CA$28.81M, which, relative to the previous year's figure, has taken a dive by a significant -34.83%. Since these figures may be relatively myopic, I’ve estimated an annualized five-year value for CanWel Building Materials Group's earnings, which stands at CA$15.45M This means that while earnings growth was negative against the prior year, over the long run, CanWel Building Materials Group's profits have been rising on average.

What's the driver of this growth? Well, let’s take a look at whether it is solely owing to industry tailwinds, or if CanWel Building Materials Group has experienced some company-specific growth. In the last few years, CanWel Building Materials Group expanded its bottom line faster than revenue by successfully controlling its costs. This brought about a margin expansion and profitability over time. Inspecting growth from a sector-level, the Canadian trade distributors industry has been growing its average earnings by double-digit 31.38% over the past year, . This is a turnaround from a volatile drop of -5.09% in the previous couple of years. This suggests that, in the recent industry expansion, CanWel Building Materials Group has not been able to reap as much as its industry peers.

What does this mean?

CanWel Building Materials Group's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. I suggest you continue to research CanWel Building Materials Group to get a better picture of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for CWX’s future growth? Take a look at our free research report of analyst consensus for CWX’s outlook.
• 2. Financial Health: Is CWX’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.