Assessing Steel & Tube Holdings Limited’s (NZSE:STU) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess STU’s recent performance announced on 30 June 2017 and evaluate these figures to its longer term trend and industry movements. See our latest analysis for Steel & Tube Holdings
Despite a decline, did STU underperform the long-term trend and the industry?
I like to use data from the most recent 12 months, 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 technique enables me to assess various companies on a similar basis, using new information. For Steel & Tube Holdings, its latest trailing-twelve-month earnings is NZ$20.0M, which, in comparison to the prior year’s figure, has declined by -22.40%. Given that these figures are fairly nearsighted, I have created an annualized five-year figure for STU’s earnings, which stands at NZ$18.6M. This suggests that while earnings declined from the prior year, in the long run, Steel & Tube Holdings’s profits have been increasing on average.
How has it been able to do this? Well, let’s take a look at if it is merely because of industry tailwinds, or if Steel & Tube Holdings has experienced some company-specific growth. In the last couple of years, Steel & Tube Holdings grew its bottom line faster than revenue by effectively controlling its costs. This brought about a margin expansion and profitability over time. Scanning growth from a sector-level, the NZ metals and mining industry has been growing its average earnings by double-digit 31.01% over the previous year, and a less exciting 3.08% over the past five. This suggests that whatever uplift the industry is profiting from, Steel & Tube Holdings has not been able to reap as much as its average peer.
What does this mean?
Though Steel & Tube Holdings’s past data is helpful, it is only one aspect of my investment thesis. Companies are profitable, but have capricious earnings, can have many factors impacting its business. You should continue to research Steel & Tube Holdings to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for STU’s future growth? Take a look at our free research report of analyst consensus for STU’s outlook.