For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Village Bank and Trust Financial Corp (NASDAQ:VBFC) useful as an attempt to give more color around how Village Bank and Trust Financial is currently performing. See our latest analysis for Village Bank and Trust Financial

Was VBFC’s recent earnings decline indicative of a tough track record?

I look at data from the most recent 12 months, 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 different companies on a more comparable basis, using the latest information. For Village Bank and Trust Financial, its latest earnings (trailing twelve month) is -US$3.59M, which, in comparison to the previous year’s figure, has turned from positive to negative. Since these values may be relatively myopic, I have calculated an annualized five-year figure for VBFC’s earnings, which stands at -US$1.86M. This doesn’t look much better, as earnings seem to have gradually been getting more and more negative over time.

We can further evaluate Village Bank and Trust Financial’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Village Bank and Trust Financial’s top-line has increased by a mere 5.47%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Looking at growth from a sector-level, the US banks industry has been growing, albeit, at a unexciting single-digit rate of 3.75% in the past year, and 8.46% over the past five. This means whatever near-term headwind the industry is experiencing, it’s hitting Village Bank and Trust Financial harder than its peers.

What does this mean?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most insightful step is to examine company-specific issues Village Bank and Trust Financial may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research Village Bank and Trust Financial to get a more holistic view of the stock by looking at:

• 1. Financial Health: Is VBFC’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.

• 2. 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.