After reading KBR Inc’s (NYSE:KBR) most recent earnings announcement (30 September 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. 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 KBR’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for KBR
Could KBR beat the long-term trend and outperform its industry?
I prefer to use the ‘latest twelve-month’ data, 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 method allows me to assess different companies on a more comparable basis, using the latest information. For KBR, its most recent earnings (trailing twelve month) is US$71.10M, which compared to the prior year’s level, has risen by a relatively unexciting 5.33%. Given that these values may be somewhat nearsighted, I have determined an annualized five-year figure for KBR’s net income, which stands at -US$32.05M This means that, on average, KBR has been able to increasingly grow its earnings over the past few years as well.What’s the driver of this growth? Well, let’s take a look at whether it is only due to an industry uplift, or if KBR has experienced some company-specific growth. Even though both top-line and bottom-line growth rates in the last few years, were, on average, negative, earnings were more so. While this resulted in a margin contraction, it has lessened KBR’s earnings contraction. Scanning growth from a sector-level, the US construction industry has been growing, albeit, at a unexciting single-digit rate of 7.55% over the prior twelve months, and 6.52% over the past five. This suggests that whatever uplift the industry is profiting from, KBR has not been able to realize the gains unlike its average peer.
What does this mean?
Though KBR’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research KBR to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for KBR’s future growth? Take a look at our free research report of analyst consensus for KBR’s outlook.
- 2. Financial Health: Is KBR’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.