U.S. Markets closed

With A -9.0% Earnings Drop, Did IG Design Group plc (LON:IGR) Really Underperform?

Simply Wall St

After reading IG Design Group plc's (AIM:IGR) most recent earnings announcement (30 September 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.

View our latest analysis for IG Design Group

Was IGR's weak performance lately a part of a long-term decline?

IGR's trailing twelve-month earnings (from 30 September 2019) of UK£15m has declined by -9.0% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 22%, indicating the rate at which IGR is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the entire industry is experiencing the hit as well.

AIM:IGR Income Statement, December 9th 2019

In terms of returns from investment, IG Design Group has fallen short of achieving a 20% return on equity (ROE), recording 8.9% instead. Furthermore, its return on assets (ROA) of 3.3% is below the GB Consumer Durables industry of 9.1%, indicating IG Design Group's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for IG Design Group’s debt level, has declined over the past 3 years from 17% to 14%.

What does this mean?

Though IG Design Group's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors influencing its business. I recommend you continue to research IG Design Group to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for IGR’s future growth? Take a look at our free research report of analyst consensus for IGR’s outlook.
  2. Financial Health: Are IGR’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2019. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.