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After looking at Shriro Holdings Limited’s (ASX:SHM) 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 Shriro Holdings
How Did SHM’s Recent Performance Stack Up Against Its Past?
I look at 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 latest information. For Shriro Holdings, its most recent earnings (trailing twelve month) is AU$14.50M, which compared to the previous year’s figure, has jumped up by 10.17%. Since these values are relatively short-term, I have calculated an annualized five-year value for SHM’s net income, which stands at AU$9.51M This means generally, Shriro Holdings has been able to consistently grow its bottom line over the last few years as well.
What’s the driver of this growth? Let’s see if it is only because of an industry uplift, or if Shriro Holdings has seen some company-specific growth. In the past couple of years, Shriro Holdings expanded 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 Australian consumer durables industry has been growing, albeit, at a subdued single-digit rate of 8.29% over the past twelve months, . This is a change from a volatile drop of -8.47% in the last few years. This means in the recent industry expansion, Shriro Holdings is able to leverage this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Shriro Holdings gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Shriro Holdings to get a more holistic view of the stock by looking at:
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1. Future Outlook: What are well-informed industry analysts predicting for SHM’s future growth? Take a look at our free research report of analyst consensus for SHM’s outlook.
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2. Financial Health: Is SHM’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.
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3. 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.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.