After looking at Coats Group plc’s (LSE:COA) latest earnings update (30 June 2017), 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 Coats Group
How COA fared against its long-term earnings performance and its industry
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This blend enables me to examine different stocks in a uniform manner using the most relevant data points. For Coats Group, its most recent trailing-twelve-month earnings is US$74.90M, which, against the previous year’s figure, has risen by 46.58%. Since these values may be somewhat short-term thinking, I have computed an annualized five-year value for COA’s earnings, which stands at -US$1.70M This suggests that, on average, Coats Group has been able to gradually raise its profits over the past couple of years as well.What’s the driver of this growth? Let’s see whether it is only attributable to an industry uplift, or if Coats Group has experienced some company-specific growth. In the past couple of years, Coats Group increased bottom-line, while its top-line declined, by effectively managing its costs. This has caused to a margin expansion and profitability over time. Looking at growth from a sector-level, the UK luxury industry has been growing its average earnings by double-digit 46.11% over the previous twelve months, and a more subdued 4.28% over the past five. This means that whatever tailwind the industry is profiting from, Coats Group is able to amplify this to its advantage.
What does this mean?
Coats Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as Coats Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Coats Group to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for COA’s future growth? Take a look at our free research report of analyst consensus for COA’s outlook.
- 2. Financial Health: Is COA’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.