Taylor Devices, Inc. :TAYD-US: Earnings Analysis: Q2, 2017 By the Numbers : January 16, 2017

Taylor Devices, Inc. reports financial results for the quarter ended November 30, 2016.

We analyze the earnings along side the following peers of Taylor Devices, Inc. – Nordson Corporation and Argan, Inc. (NDSN-US and AGX-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 7.81 million, Net Earnings of USD 0.94 million.
  • Gross margins widened from 33.96% to 35.17% compared to the same period last year, operating (EBITDA) margins now 20.57% from 18.38%.
  • Year-on-year change in operating cash flow of -205.93% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

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

2016-11-30 2016-08-31 2016-05-31 2016-02-29 2015-11-30
Relevant Numbers (Quarterly)
Revenues (mil) 7.81 5.76 9.06 8.33 8.82
Revenue Growth (%YOY) -11.48 -39.24 -15.84 26.8 31.54
Earnings (mil) 0.94 0.21 1.09 1.18 0.92
Earnings Growth (%YOY) 1.47 -79.22 23.21 201.62 83.35
Net Margin (%) 12.02 3.65 12.05 14.19 10.48
EPS 0.27 0.06 0.32 0.35 0.27
Return on Equity (%) 12.08 2.76 14.8 16.7 13.62
Return on Assets (%) 10.14 2.27 11.79 12.97 10.46

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Market Share Versus Profits

Revenues History
Earnings History

TAYD-US‘s change in revenue this period compared to the same period last year of -11.48% 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 TAYD-US is holding onto its market share. Also, for comparison purposes, revenues changed by 35.65% and earnings by 347.15% 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 was influenced by year-on-year improvement in gross margins from 33.96% to 35.17% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 18.38% to 20.57% compared to the same period last year. For comparison, gross margins were 25.16% and EBITDA margins were 8.45% in the last reporting period.

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

TAYD-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 248.29, compared to last year’s level of 192.58 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

TAYD-US‘s change in operating cash flow of -205.93% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 16.08% to 17.58% and (2) one-time items. The company’s pretax margins are now 17.91% compared to 16.15% for the same period last year.

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

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Company Profile

Taylor Devices, Inc. engages in the design, development, manufacture and marketing of shock absorption, rate control and energy storage devices for use in various types of vehicles, machinery, equipment and structures. Its products include seismic dampers, which are designed to ameliorate the effects of earthquake tremors on structures, and represent a substantial part of the business of the company; Fluidicshoks, which are small, extremely compact shock absorbers, produced in various sizes for primary use in the defense, aerospace and commercial industry; crane and industrial buffers, which are larger versions of the Fluidicshoks, produced in various sizes for industrial application on cranes, ships, container ships, railroad cars, truck docks, ladle and ingot cars, ore trolleys and car stops; self-adjusting shock absorbers, which include versions of Fluidicshoks and crane and industrial buffers, automatically adjust to different impact conditions, and are designed for high cycle application primarily in the heavy industry; liquid die springs, which are used as component parts of machinery and equipment used in the manufacture of tools and dies; and vibration dampers, which are used primarily by the aerospace and defense industries to control the response of electronics and optical systems subjected to air, ship, or spacecraft vibration. The company was founded by Paul H. Taylor on July 22, 1955 and is headquartered in North Tonawanda, NY.

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