After looking at CI Financial Corp’s (TSX:CIX) latest earnings update (31 March 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. Check out our latest analysis for CI Financial
Did CIX perform worse than its track record and industry?
For the purpose of this commentary, I like to use 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 blend allows me to examine many different companies on a similar basis, using new information. For CI Financial, its latest earnings (trailing twelve month) is CA$512.47M, which, in comparison to the prior year’s level, has plunged by -3.84%. Given that these figures are relatively short-term thinking, I have estimated an annualized five-year figure for CIX’s net income, which stands at CA$460.14M This shows that despite the fact that earnings growth was negative from last year, in the long run, CI Financial’s earnings have been increasing on average.How has it been able to do this? Let’s take a look at if it is merely attributable to an industry uplift, or if CI Financial has experienced some company-specific growth. Over the last couple of years, CI Financial grew its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Inspecting growth from a sector-level, the Canadian capital markets industry has been relatively flat in terms of earnings growth over the previous year, levelling off from a robust 17.74% over the past five. This means that any recent headwind the industry is experiencing, it’s hitting CI Financial harder than its peers.
What does this mean?
Though CI Financial’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. I recommend you continue to research CI Financial to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CIX’s future growth? Take a look at our free research report of analyst consensus for CIX’s outlook.
- Financial Health: Is CIX’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.