Does Atlas Financial Holdings Inc’s (NASDAQ:AFH) Past Performance Indicate A Weaker Future?

When Atlas Financial Holdings Inc (NASDAQ:AFH) announced its most recent earnings (30 September 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Atlas Financial Holdings has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see AFH has performed. View our latest analysis for Atlas Financial Holdings

Despite a decline, did AFH underperform the long-term trend and the industry?

I look at data from the most recent 12 months, 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 method allows me to examine different stocks on a similar basis, using the most relevant data points. For Atlas Financial Holdings, its most recent trailing-twelve-month earnings is US$1.88M, which, relative to the previous year’s figure, has plunged by a significant -90.71%. Since these values may be fairly myopic, I have created an annualized five-year figure for Atlas Financial Holdings’s earnings, which stands at US$5.53M This doesn’t seem to paint a better picture, as earnings seem to have consistently been declining over the longer term.

NasdaqGM:AFH Income Statement Mar 5th 18
NasdaqGM:AFH Income Statement Mar 5th 18
What could be happening here? Well, let’s take a look at what’s going on with margins and whether the rest of the industry is facing the same headwind. Over the past couple of years, revenue growth has fallen behind which implies that Atlas Financial Holdings’s bottom line has been driven by unmaintainable cost-cutting. Looking at growth from a sector-level, the US insurance industry has been growing, albeit, at a subdued single-digit rate of 7.38% in the past twelve months, and 8.42% over the past five years. This shows that whatever uplift the industry is deriving benefit from, Atlas Financial Holdings has not been able to gain as much as its average peer.

What does this mean?

Atlas Financial Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Generally companies that face a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. You should continue to research Atlas Financial Holdings to get a more holistic view of the stock by looking at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.

  • 1. Future Outlook: What are well-informed industry analysts predicting for AFH’s future growth? Take a look at this free research report of analyst consensus for AFH’s outlook.
  • 2. Financial Health: Is AFH’s operations financially sustainable? Balance sheets can be hard to analyze, which is why Simply Wall St does it for you. Check out important financial health checks here.
  • 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore a free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2017. This may not be consistent with full year annual report figures.