Steelcase Inc. (SCS) reports preliminary financial results for the quarter ended 2012-08-31.
Steelcase Inc. (SCS) recently reported its preliminary financial results based on which we provide a unique peer-based analysis of the company. Our analysis is based on the company’s performance over the last twelve months (unless stated otherwise). For a more detailed analysis of this company (and over 40,000 other global equities) please visit www.capitalcube.com.
Steelcase Inc.’s analysis versus peers uses the following peer-set: HNI Corp. (HNI), Herman Miller Inc. *(MLHR), Okamura Corp. (7994), Knoll Inc. (KNL), Itoki Corp. (7972) and Fursys Inc. (016800-KR). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.
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|Quarterly (USD million)||2012-08-31||2012-05-31||2012-02-29||2011-11-30||2011-08-31|
|Revenue Growth %||10.3||(2.2)||(4.1)||2.7||9.6|
|Net Income Growth %||126.9||(11.0)||(33.6)||84.9||58.7|
|Net Margin %||4.0||1.9||2.1||3.1||1.7|
|ROE % (Annualized)||17.2||7.5||8.3||12.6||6.7|
|ROA % (Annualized)||7.0||3.1||3.4||4.9||2.4|
Steelcase Inc. trades at a lower Price/Book multiple (1.7) than its peer median (2.9). The market expects SCS-US to grow at about the same rate as its chosen peers (PE of 14.9 compared to peer median of 15.0) and to maintain the peer median return (ROE of 11.3%) it currently generates.
The company’s median net profit margins of 2.8% and relative asset efficiency (asset turns of 1.6x compared to peer median of 1.3x) give it some operating leverage. SCS-US’s net margin continues to trend upward and is above (but within one standard deviation of) its five-year average net margin of 1.2%.
The company enjoys both better than peer median annual revenue growth of 12.8% and better than peer median earnings growth performance 173.0%. SCS-US currently converts every 1% of change in annual revenue into 13.5% of change in annual reported earnings. We view this company as a leader among its peers.
SCS-US’s current return on assets is around the same as its peer median (4.4% vs. peer median 4.8%). This recent performance contrasts with its less than peer median return on assets over the past five years (1.7% vs. peer median 4.1%) suggesting that the company’s relative operating performance is improving.
The company’s gross margin of 32.5% is around peer median suggesting that SCS-US’s operations do not benefit from any differentiating pricing advantage. In addition, SCS-US’s pre-tax margin of 4.1% is also around the peer median suggesting no operating cost advantage relative to peers.
Growth & Investment Strategy
SCS-US’s revenues have grown at about the same rate as its peers (-4.8% vs. -4.7% respectively for the past three years). Similarly, the stock price implies median long-term growth as its PE ratio is around the peer median of 14.9. The historical performance and long-term growth expectations for the company are largely in sync.
SCS-US’s annualized rate of change in capital of 0.4% over the past three years is greater than the peer median of -0.4%. This relatively high investment has generated a less than peer median return on capital of 1.8% averaged over the same three years. The relatively high investment and low current returns lead us to believe thatthe company is betting heavily on the future.
SCS-US’s net income margin for the last twelve months is around the peer median (2.8% vs. peer median of 2.8%). This average margin and relatively conservative accrual policy (1.9% vs. peer median of 0.5%) suggestspossible understatement of its reported net income.
SCS-US’s accruals over the last twelve months are around zero. However, this modestly positive level is also greater than the peer median which suggests some amount of building of reserves.