For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Advent-AWI Holdings Inc (TSXV:AWI) useful as an attempt to give more color around how Advent-AWI Holdings is currently performing. See our latest analysis for Advent-AWI Holdings
Were AWI’s earnings stronger than its past performances and the industry?
I prefer to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This technique allows me to examine different companies in a uniform manner using the most relevant data points. For Advent-AWI Holdings, its most recent bottom-line (trailing twelve month) is CA$1.30M, which, in comparison to the previous year’s level, has moved up by 13.30%. Given that these figures are somewhat short-term, I’ve determined an annualized five-year value for AWI’s earnings, which stands at CA$1.37M This means although earnings increased from last year’s level, over the past couple of years, Advent-AWI Holdings’s earnings have been waning on average.What could be happening here? Well, let’s look at what’s occurring with margins and whether the rest of the industry is facing the same headwind. Over the past couple of years, Advent-AWI Holdings has, on average, delivered negative top- and bottom-line growth. As revenues fell by more, expenses have been lowered in order to sustain margins – not the most sustainable operating activity. Looking at growth from a sector-level, the Canadian specialty retail industry has been growing its average earnings by double-digit 17.42% over the previous year, and a more muted 8.92% over the last five years. This means that any tailwind the industry is enjoying, Advent-AWI Holdings has not been able to reap as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be factors that are affecting the industry as a whole, hence the high industry growth rate over the same time frame. I recommend you continue to research Advent-AWI Holdings to get a better picture of the stock by looking at:
- 1. Financial Health: Is AWI’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.
- 2. 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.