After looking at Pier 1 Imports Inc’s (NYSE:PIR) latest earnings update (03 March 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. 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 an important aspect. In this article I briefly touch on my key findings. Check out our latest analysis for Pier 1 Imports
How Did PIR’s Recent Performance Stack Up Against Its Past?
For the purpose of this commentary, 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 method enables me to assess different companies on a more comparable basis, using the latest information. For Pier 1 Imports, its latest trailing-twelve-month earnings is US$11.63M, which compared to last year’s figure, has sunken by a non-trivial -61.67%. Given that these values are relatively nearsighted, I have estimated an annualized five-year value for Pier 1 Imports’s net income, which stands at US$86.62M This doesn’t seem to paint a better picture, since earnings seem to have steadily been deteriorating over the longer term.
Why could this be happening? Well, let’s look at what’s going on with margins and if the whole industry is feeling the heat. Revenue growth in the last few years, has been positive, yet earnings growth has been declining. This means Pier 1 Imports has been ramping up expenses, which is hurting margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the US specialty retail industry has been growing, albeit, at a subdued single-digit rate of 4.08% over the past year, and 6.34% over the past half a decade. This means that any recent headwind the industry is facing, it’s hitting Pier 1 Imports harder than its peers.
What does this mean?
Pier 1 Imports’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. In some cases, companies that experience a prolonged period of decline in earnings are going through some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a indicator of a structural shift, which makes Pier 1 Imports and its peers a riskier investment. You should continue to research Pier 1 Imports to get a better picture of the stock by looking at: