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 Provident Bancorp Inc (NASDAQ:PVBC) useful as an attempt to give more color around how Provident Bancorp is currently performing. View out our latest analysis for Provident Bancorp
How Did PVBC’s Recent Performance Stack Up Against Its Past?PVBC’s trailing twelve-month earnings (from 31 March 2018) of US$8.14m has jumped 22.26% compared to the previous year. However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 22.34%, indicating the rate at which PVBC is growing has slowed down. What could be happening here? Well, let’s look at what’s transpiring with margins and whether the entire industry is feeling the heat.
In the past couple of years, revenue growth has been lagging behind which implies that Provident Bancorp’s bottom line has been propelled by unsustainable cost-reductions. Scanning growth from a sector-level, the US mortgage industry has been growing, albeit, at a muted single-digit rate of 8.88% over the past twelve months, and a substantial 13.87% over the past five. This shows that whatever tailwind the industry is profiting from, Provident Bancorp is capable of amplifying this to its advantage.In terms of returns from investment, Provident Bancorp has not invested its equity funds well, leading to a 6.93% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 0.91% exceeds the US Mortgage industry of 0.66%, indicating Provident Bancorp has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Provident Bancorp’s debt level, has increased over the past 3 years from 6.14% to 10.90%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Provident Bancorp to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PVBC’s future growth? Take a look at our free research report of analyst consensus for PVBC’s outlook.
- Financial Health: Is PVBC’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.