For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at Tamawood Limited’s (ASX:TWD) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. See our latest analysis for TWD
Did TWD beat its long-term earnings growth trend and its industry?
I prefer to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique enables me to analyze many different companies on a similar basis, using the latest information. For Tamawood, the most recent bottom-line is A$9.1M, which compared to the prior year’s level, has increased by 12.63%. Since these figures are somewhat short-term thinking, I have created an annualized five-year value for TWD’s earnings, which stands at A$6.8M. This means generally, Tamawood has been able to consistently grow its bottom line over the past couple of years as well.
What’s the driver of this growth? Let’s see whether it is only due to industry tailwinds, or if Tamawood has experienced some company-specific growth. In the past few years, Tamawood grew bottom-line, while its top-line fell, by effectively managing its costs. This has led to to a margin expansion and profitability over time. Scanning growth from a sector-level, the Australian household durables industry has been growing, albeit, at a unexciting single-digit rate of 3.70% over the previous twelve months, . This is a change from a volatile drop of -9.05% in the last few years. This shows that whatever near-term headwind the industry is enduring, Tamawood is less exposed compared to its peers.
What does this mean?
Though Tamawood’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Tamawood gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Tamawood to get a better picture of the stock by looking at:
1. Financial Health: Is TWD’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. Valuation: What is TWD worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether TWD is currently mispriced by the market.