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23, Sep 2018 -

Deltic Timber Corporation (NYSE:DEL): Does -28.92% Earnings Drop In A Year Reflect The Long-Term Trend?

Deltic Timber Corporation (NYSE:DEL): Does -28.92% Earnings Drop In A Year Reflect The Long-Term Trend?

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Examining how Deltic Timber Corporation (NYSE:DEL) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how Deltic Timber is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its forestry industry peers.

Commentary On DEL’s Past Performance

I 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 allows me to assess different stocks on a similar basis, using the latest information. For Deltic Timber, its most recent earnings (trailing twelve month) is US$6.49M, which, in comparison to the prior year’s level, has declined by -28.92%. Given that these figures are relatively nearsighted, I have created an annualized five-year figure for Deltic Timber’s earnings, which stands at US$11.03M This doesn’t seem to paint a better picture, since earnings seem to have steadily been deteriorating over the longer term.

What could be happening here? Well, let’s take a look at what’s transpiring with margins and whether the rest of the industry is facing the same headwind. Revenue growth in the past few years, has been positive, yet earnings growth has been deteriorating. This suggest that Deltic Timber 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 forestry industry has been growing its average earnings by double-digit 10.71% in the prior twelve months, and 12.60% over the past five. This means that whatever uplift the industry is profiting from, Deltic Timber has not been able to leverage it as much as its industry peers.What does this mean?
Though Deltic Timber’s past data is helpful, it is only one aspect of my investment thesis. Usually companies that face a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry disruption and growth. I recommend you continue to research Deltic Timber to get a more holistic view of the stock by looking at:

  • Financial Health: Is DEL’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.
  • Valuation: What is DEL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether DEL is currently mispriced by the market.
  • Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records

Source: www.simplywall.st

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