Margins matter. The more Pioneer Drilling
Here's the current margin snapshot for Pioneer Drilling over the trailing 12 months: Gross margin is 36.2%, while operating margin is 8.1% and net margin is 1.6%.
Unfortunately, a look at the most recent numbers doesn't tell us much about where Pioneer Drilling has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.
Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter. You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.
Here's the margin picture for Pioneer Drilling over the past few years.
Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.
Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them. To compare quarterly margins to their prior-year levels, consult this chart.
Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.
Here's how the stats break down:
- Over the past five years, gross margin peaked at 42.7% and averaged 37.1%. Operating margin peaked at 20.9% and averaged 7.0%. Net margin peaked at 13.6% and averaged -1.8%.
- TTM gross margin is 36.2%, 90 basis points worse than the five-year average. TTM operating margin is 8.1%, 110 basis points better than the five-year average. TTM net margin is 1.6%, 340 basis points better than the five-year average.
With recent TTM operating margins exceeding historical averages, Pioneer Drilling looks like it is doing fine.
Over the decades, small-cap stocks like Pioneer Drilling have produced market-beating returns, provided they're value-priced and have solid businesses. Read about a pair of companies with a lock on their markets in "Too Small to Fail: 2 Small Caps the Government Won't Let Go Broke." Click here for instant access to this free report.
- Add Pioneer Drilling to My Watchlist.