Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Shyft’s recent performance shows its demand remained suppressed as its revenue has declined by 13.7% annually over the last two years. Shyft isn’t alone in its struggles as the Heavy Transportation Equipment industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

Shyft also breaks out the revenue for its most important segments, Fleet Vehicles and Specialty Vehicles , which are 47% and 40.2% of revenue. Over the last two years, Shyft’s Fleet Vehicles revenue (commercial delivery vehicles) averaged 20.1% year-on-year declines while its Specialty Vehicles revenue ( RV chassis and truck bodies) averaged 4.6% declines.

This quarter, Shyft reported modest year-on-year revenue growth of 3.4% but beat Wall Street’s estimates by 2.8%.

Looking ahead, sell-side analysts expect revenue to grow 15.5% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and suggests its newer products and services will fuel better top-line performance.

Today’s young investors likely haven’t read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next .

Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Shyft was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.1% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Looking at the trend in its profitability, Shyft’s operating margin decreased by 6.2 percentage points over the last five years. Shyft’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Shyft’s breakeven margin was up 1.8 percentage points year on year. Since its gross margin expanded more than its operating margin, we can infer that leverage on its cost of sales was the primary driver behind the recently higher efficiency.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Shyft, its EPS declined by 15.8% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.

Diving into the nuances of Shyft’s earnings can give us a better understanding of its performance. As we mentioned earlier, Shyft’s operating margin improved this quarter but declined by 6.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Shyft, its two-year annual EPS declines of 38.4% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q1, Shyft reported EPS at $0.07, up from negative $0.04 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Shyft’s full-year EPS of $0.55 to grow 96.9%.

Key Takeaways from Shyft’s Q1 Results

We were impressed by how significantly Shyft blew past analysts’ EPS and EBITDA expectations this quarter. We were also excited its full-year EBITDA guidance and revenue outperformed Wall Street’s estimates. Zooming out, we think this was a good quarter with some key areas of upside. The stock traded up 7% to $7.80 immediately following the results.

Sure, Shyft had a solid quarter, but if we look at the bigger picture, is this stock a buy? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free .