Examining Big 5 Sporting Goods Corporation’s (NASDAQ:BGFV) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess BGFV’s latest performance announced on 31 December 2017 and weigh these figures against its longer term trend and industry movements. Check out our latest analysis for Big 5 Sporting Goods
How Well Did BGFV Perform?
I like 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 blend allows me to analyze different stocks in a uniform manner using the latest information. For Big 5 Sporting Goods, its most recent earnings (trailing twelve month) is US$1.10M, which, against last year’s level, has dropped by a substantial -93.45%. Since these values may be fairly short-term, I have estimated an annualized five-year figure for BGFV’s earnings, which stands at US$16.55M This doesn’t seem to paint a better picture, as earnings seem to have consistently been deteriorating over the longer term.Why could this be happening? Well, let’s take a look at what’s occurring with margins and if the whole industry is experiencing the hit as well. Revenue growth in the last few years, has been positive, nevertheless earnings growth has been deteriorating. This implies that Big 5 Sporting Goods has been growing expenses, which is hurting margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the US specialty retail industry has been growing, albeit, at a muted single-digit rate of 5.92% in the prior twelve months, and 6.34% over the last five years. This means any uplift the industry is deriving benefit from, Big 5 Sporting Goods has not been able to reap as much as its industry peers.
What does this mean?
Though Big 5 Sporting Goods’s past data is helpful, it is only one aspect of my investment thesis. Usually companies that endure an extended period of reduction in earnings are going through some sort of reinvestment phase with the aim of keeping up with the latest industry disruption and growth. I recommend you continue to research Big 5 Sporting Goods to get a more holistic view of the stock by looking at:
- Financial Health: Is BGFV’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.