Does Zimtu Capital Corp’s (CVE:ZC) -85.23% Earnings Drop Reflect A Longer Term Trend?

When Zimtu Capital Corp (CVE:ZC) announced its most recent earnings (28 February 2018), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Zimtu Capital performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see ZC has performed. See our latest analysis for Zimtu Capital

How Well Did ZC Perform?

ZC recently turned a profit of CA$1.09m (most recent trailing twelve-months) compared to its average loss of -CA$614.10k over the past five years.

Over the last couple of years, Zimtu Capital grew bottom-line, while its top-line declined, by efficiently managing its costs. This has led to to a margin expansion and profitability over time. Scanning growth from a sector-level, the Canadian capital markets industry has been enduring some headwinds over the previous year, leading to an average earnings drop of -4.89%. This is a major change, given that the industry has constantly been delivering a a strong growth of 17.34% in the previous five years. This shows that whatever near-term headwind the industry is facing, it’s hitting Zimtu Capital harder than its peers.

TSXV:ZC Income Statement June 22nd 18
TSXV:ZC Income Statement June 22nd 18
In terms of returns from investment, Zimtu Capital has not invested its equity funds well, leading to a 7.73% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 7.40% is below the CA Capital Markets industry of 8.09%, indicating Zimtu Capital’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Zimtu Capital’s debt level, has increased over the past 3 years from -52.15% to 5.34%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors influencing its business. I suggest you continue to research Zimtu Capital to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for ZC’s future growth? Take a look at our free research report of analyst consensus for ZC’s outlook.
  2. Financial Health: Is ZC’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 28 February 2018. This may not be consistent with full year annual report figures.