Ossen Innovation Co., Ltd. :OSN-US: Earnings Analysis: Q3, 2017 By the Numbers : December 28, 2017

Ossen Innovation Co., Ltd. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of Ossen Innovation Co., Ltd. – Cleantech Solutions International, Inc. (CLNT-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 37.63 million, Net Earnings of USD 1.61 million.
  • Gross margins widened from 11.25% to 12.02% compared to the same period last year, operating (EBITDA) margins now 6.41% from 8.08%.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 37.63 26.54 25.01 33.81 27.95
Revenue Growth (%YOY) 34.63 15.58 -14.64 -2.39 -5.4
Earnings (mil) 1.61 1.17 0.05 2.63 1.31
Earnings Growth (%YOY) 22.24 303.29 -89.2 487.78 -59.31
Net Margin (%) 4.27 4.4 0.19 7.79 4.7
EPS 0.24 0.18 0.01 0.41 0.21
Return on Equity (%) 1.49 1.12 0.05 2.56 1.28
Return on Assets (%) 4.53 3.32 0.14 7.35 3.6

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Market Share Versus Profits

Revenues History
Earnings History

OSN-US’s change in revenue this period compared to the same period last year of 34.63% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that OSN-US is holding onto its market share. Also, for comparison purposes, revenues changed by 41.77% and earnings by 37.42% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 11.25% to 12.02%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

OSN-US’s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days are now 260.68 days compared to 319.40 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Ossen Innovation Co., Ltd.

Company Profile

Ossen Innovation Co., Ltd. design, manufactures and sells pre-stressed steel materials. The company products include plain surface steel wires and strands; and rare earth coated and zinc-coated pre-stressed steel materials. It operates through the following segments: Domestic and International Sales. The company was founded in 2004 and is headquartered in Shanghai, China.

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