Today I will take a look at Shriro Holdings Limited’s (ASX:SHM) most recent earnings update (30 June 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the household durables industry performed. As an investor, I find it beneficial to assess SHM’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for SHM
Was SHM’s weak performance lately a part of a long-term decline?
I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to examine many different companies on a similar basis, using new information. Shriro Holdings’s latest twelve-month earnings is A$13M, which, relative to the previous year’s level, has fallen by -0.04%. Given that these values are fairly short-term, I’ve computed an annualized five-year value for Shriro Holdings’s earnings, which stands at A$9M. This means that, on average, Shriro Holdings has been able to grow its earnings over the last couple of years.
How has it been able to do this? Well, let’s take a look at if it is merely a result of industry tailwinds, or if Shriro Holdings has experienced some company-specific growth. In the last couple of years, Shriro Holdings expanded its bottom line faster than revenue by successfully controlling its costs. This resulted in a margin expansion and profitability over time. Eyeballing growth from a sector-level, the Australian household durables industry has been growing, albeit, at a subdued single-digit rate of 3.70% over the prior year, . This is a change from a volatile drop of -9.05% in the last couple of years. This shows that whatever headwind the industry is enduring, it’s hitting Shriro Holdings harder than its peers.
What does this mean?
Shriro Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies are profitable, but have volatile earnings, can have many factors influencing its business. I suggest you continue to research Shriro Holdings to get a better picture of the stock by looking at:
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.
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.