CIRCOR International, Inc. (NYSE: CIR) shareholders will no doubt be very grateful to see the stock price increase by 32% in the past month. But that can’t change the reality that over the longer term (five years) the returns have been really quite dismal. In fact, the stock price has rather fallen, down about 52% during this time. We are therefore hesitant to attach much importance to the short-term increase. However, in the best case (far from fait accompli), this performance improvement can be sustained.
With that in mind, it’s worth looking at whether the company’s underlying fundamentals have been driving long-term performance, or if there are any gaps.
CIRCOR International has not been profitable for the last twelve months, we are unlikely to see a strong correlation between its share price and its earnings per share (EPS). Income is arguably our second best option. Generally speaking, companies without profits should increase their revenue every year, and at a good pace. Some companies are willing to defer profitability to increase revenue faster, but in this case, good revenue growth is expected.
Over the past five years, CIRCOR International has seen its turnover increase by 0.9% per year. It’s far from impressive considering all the money he loses. This lackluster growth no doubt fueled the loss of 9% per year, at that time. We would like to see evidence that future revenue growth is likely to be much stronger before we focus too much on CIRCOR International. However, it is possible that too many people in the market are ignoring it, and there could be an opportunity if it starts to recover on the right track.
The image below shows how earnings and income have tracked over time (if you click on the image you can see more details).
We are pleased to report that the CEO is compensated more modestly than most CEOs of similarly capitalized companies. But while it’s still worth checking out CEO compensation, the really important question is whether the company can increase its profits in the future. If you are considering buying or selling shares of CIRCOR International, you should review this free report showing analyst earnings forecasts.
A different perspective
We regret to report that CIRCOR International shareholders are down 33% for the year. Unfortunately, this is worse than the general market decline of 20%. That said, it is inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance may point to unresolved challenges, given that it was worse than the 9% annualized loss over the past half-decade. We realize that Baron Rothschild said investors should “buy when there’s blood in the streets”, but we caution that investors should first make sure they are buying a high quality company. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. Example: we have identified 1 warning sign for CIRCOR International you should be aware.
We’ll like CIRCOR International better if we see big insider buying. In the meantime, watch this free list of growing companies with significant and recent insider buying.
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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