After looking at Perma-Pipe International Holdings Inc’s (NASDAQ:PPIH) latest earnings announcement (31 October 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Perma-Pipe International Holdings’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for Perma-Pipe International Holdings
Could PPIH beat the long-term trend and outperform its industry?
I prefer to 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 technique enables me to examine various companies in a uniform manner using the most relevant data points. For Perma-Pipe International Holdings, its most recent trailing-twelve-month earnings is -US$9.75M, which, against the previous year’s level, has become less negative. Since these values may be relatively short-term, I have calculated an annualized five-year value for PPIH’s earnings, which stands at -US$3.32M. This means Perma-Pipe International Holdings has historically performed better than recently, although it seems like earnings are now heading back towards a more favorable position once more.We can further examine Perma-Pipe International Holdings’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Perma-Pipe International Holdings has seen an annual decline in revenue of -14.92%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the US machinery industry has been growing its average earnings by double-digit 21.79% in the prior twelve months, and a less exciting 3.88% over the last five years. This suggests that whatever tailwind the industry is deriving benefit from, Perma-Pipe International Holdings has not been able to realize the gains unlike its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to predict what will happen in the future and when. The most insightful step is to assess company-specific issues Perma-Pipe International Holdings may be facing and whether management guidance has dependably been met in the past. You should continue to research Perma-Pipe International Holdings to get a more holistic view of the stock by looking at:
- 1. Financial Health: Is PPIH’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.