Should You Be Happy With Conifex Timber Inc's (TSE:CFF) Performance Lately?

Measuring Conifex Timber Inc's (TSE:CFF) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess CFF's recent performance announced on 31 March 2018 and compare these figures to its historical trend and industry movements.

See our latest analysis for Conifex Timber

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

CFF's trailing twelve-month earnings (from 31 March 2018) of CA$20.93m has declined by -48.12% compared to the previous year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 44.72%, indicating the rate at which CFF is growing has slowed down. What could be happening here? Let's examine what's transpiring with margins and whether the rest of the industry is facing the same headwind.

In the last few years, revenue growth has fallen behind which implies that Conifex Timber’s bottom line has been propelled by unsustainable cost-reductions. Viewing growth from a sector-level, the Canadian forestry industry has been multiplying average earnings growth of 71.35% in the prior twelve months, and a robust 23.90% over the past five years. This growth is a median of profitable companies of 10 Forestry companies in CA including Supremex, Western Forest Products and Stella-Jones. This means that any uplift the industry is deriving benefit from, Conifex Timber has not been able to reap as much as its average peer.

In terms of returns from investment, Conifex Timber has not invested its equity funds well, leading to a 9.85% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 5.90% is below the CA Forestry industry of 9.29%, indicating Conifex Timber's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Conifex Timber’s debt level, has increased over the past 3 years from 1.84% to 6.11%.

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 impacting its business. I suggest you continue to research Conifex Timber to get a better picture of the stock by looking at:

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

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

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.