Measuring Rent-A-Center Inc’s (NASDAQ:RCII) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess RCII’s recent performance announced on 30 September 2017 and compare these figures to its historical trend and industry movements. View our latest analysis for Rent-A-Center
Were RCII’s earnings stronger than its past performances and the industry?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend allows me to assess many different companies in a uniform manner using the most relevant data points. For Rent-A-Center, its latest trailing-twelve-month earnings is -$174.6M, which, relative to the prior year’s level, has become less negative. Since these values are somewhat short-term, I have determined an annualized five-year figure for RCII’s net income, which stands at -$65.8M. This means that, Rent-A-Center has historically performed better than recently, although it seems like earnings are now heading back in the right direction again.
We can further evaluate Rent-A-Center’s loss by researching what’s going on in the industry as well as within the company. First, I want to briefly look into the line items. Revenue growth over the past couple of years has been relatively unexciting, remaining flat on average at 0.66%. Since top-line growth is also pretty stale the key to profitability going forward would be managing costs. Viewing growth from a sector-level, the US specialty retail industry has been growing, albeit, at a subdued single-digit rate of 8.14% over the prior year, and 5.98% over the previous five years. This shows that, while Rent-A-Center is presently running a loss, it may have benefited from industry tailwinds, moving earnings towards to right direction.
What does this mean?
Though Rent-A-Center’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to envisage what will happen in the future and when. The most useful step is to examine company-specific issues Rent-A-Center may be facing and whether management guidance has dependably been met in the past. You should continue to research Rent-A-Center to get a better picture of the stock by looking at: