Margins matter. The more Sun Hydraulics
Here's the current margin snapshot for Sun Hydraulics over the trailing 12 months: Gross margin is 38.8%, while operating margin is 27.1% and net margin is 18.5%.
Unfortunately, a look at the most recent numbers doesn't tell us much about where Sun Hydraulics 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 (LFQ). 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 Sun Hydraulics 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 38.8% and averaged 32.4%. Operating margin peaked at 27.1% and averaged 18.1%. Net margin peaked at 18.5% and averaged 12.4%.
- TTM gross margin is 38.8%, 640 basis points better than the five-year average. TTM operating margin is 27.1%, 900 basis points better than the five-year average. TTM net margin is 18.5%, 610 basis points better than the five-year average.
With TTM operating and net margins at a five-year high, Sun Hydraulics looks like it's doing great.
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