After looking at Currency Exchange International, Corp.’s (TSX:CXI) latest earnings announcement (31 January 2020), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. 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 a crucial aspect. Below is a brief commentary on my key takeaways.
View our latest analysis for Currency Exchange International
Was CXI’s recent earnings decline indicative of a tough track record?
CXI’s trailing twelve-month earnings (from 31 January 2020) of US$3.3m has declined by -13% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -2.7%, indicating the rate at which CXI is growing has slowed down. What could be happening here? Well, let’s look at what’s going on with margins and if the rest of the industry is experiencing the hit as well.
TSX:CXI Income Statement, March 23rd 2020
In terms of returns from investment, Currency Exchange International has fallen short of achieving a 20% return on equity (ROE), recording 4.9% instead. Furthermore, its return on assets (ROA) of 3.3% is below the CA Consumer Finance industry of 5.0%, indicating Currency Exchange International’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Currency Exchange International’s debt level, has declined over the past 3 years from 9.7% to 8.7%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 1.4% to 16% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Typically companies that endure a prolonged period of diminishing earnings are going through some sort of reinvestment phase in order to keep up with the recent industry growth and disruption. You should continue to research Currency Exchange International to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CXI’s future growth? Take a look at our free research report of analyst consensus for CXI’s outlook.
- Financial Health: Are CXI’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.
- 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 January 2020. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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