Today I will examine Silver Chef Limited’s (ASX:SIV) latest earnings update (30 June 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of SIV’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. View our latest analysis for Silver Chef
Despite a decline, did SIV underperform the long-term trend and the industry?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This enables me to analyze different stocks on a similar basis, using the latest information. “For Silver Chef, its “, most recent earnings is A$20.2M, which compared to the previous year’s level, has plunged by -9.44%. Since these values are fairly nearsighted, I have created an annualized five-year value for Silver Chef’s net income, which stands at A$13.0M. This means that even though earnings growth was negative against the previous year, over the long run, Silver Chef’s profits have been rising on average.
How has it been able to do this? Let’s see whether it is solely due to industry tailwinds, or if Silver Chef has seen some company-specific growth. The climb in earnings seems to be supported by a robust top-line increase beating its growth rate of costs. Though this has led to a margin contraction, it has made Silver Chef more profitable. Eyeballing growth from a sector-level, the Australian trade distributors industry has been enduring some headwinds over the past year, leading to an average earnings drop of -4.58%. This is a momentous change, given that the industry has constantly been delivering a a strong growth of 11.02% in the previous five years. This means that any near-term headwind the industry is enduring, it’s hitting Silver Chef harder than its peers.
What does this mean?
Silver Chef’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies are profitable, but have unpredictable earnings, can have many factors influencing its business. I suggest you continue to research Silver Chef to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for SIV’s future growth? Take a look at our free research report of analyst consensus for SIV’s outlook.