After looking at Nicholas Financial Inc’s (NASDAQ:NICK) latest earnings announcement (31 December 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. Check out our latest analysis for Nicholas Financial
How Well Did NICK Perform?
For the purpose of this commentary, I like 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 enables me to analyze different stocks on a similar basis, using the most relevant data points. For Nicholas Financial, its latest earnings (trailing twelve month) is -US$2.78M, which, relative to the prior year’s figure, has turned from positive to negative. Given that these values may be somewhat short-term, I have created an annualized five-year value for Nicholas Financial’s earnings, which stands at US$14.84M.
We can further evaluate Nicholas Financial’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Nicholas Financial has seen an annual decline in revenue of -5.89%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Viewing growth from a sector-level, the US consumer finance industry has been growing, albeit, at a unexciting single-digit rate of 4.65% in the prior twelve months, and a substantial 10.50% over the past half a decade. This shows that whatever near-term headwind the industry is enduring, it’s hitting Nicholas Financial harder than its peers.
What does this mean?
Nicholas Financial’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always hard to forecast what will occur going forward, and when. The most useful step is to assess company-specific issues Nicholas Financial may be facing and whether management guidance has steadily been met in the past. You should continue to research Nicholas Financial to get a better picture of the stock by looking at: