After looking at Badger Daylighting Ltd.'s (TSX:BAD) latest earnings update (30 September 2019), I found it helpful to revisit the company's performance in the past couple of years 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 an important aspect. In this article I briefly touch on my key findings.
Did BAD perform worse than its track record and industry?
BAD's trailing twelve-month earnings (from 30 September 2019) of CA$67m has declined by -11% 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 12%, indicating the rate at which BAD is growing has slowed down. Why is this? Let's examine what's occurring with margins and if the entire industry is experiencing the hit as well.
In terms of returns from investment, Badger Daylighting has invested its equity funds well leading to a 20% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the CA Construction industry of 4.6%, indicating Badger Daylighting has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Badger Daylighting’s debt level, has increased over the past 3 years from 13% to 17%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 57% to 50% over the past 5 years.
What does this mean?
Badger Daylighting's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I recommend you continue to research Badger Daylighting to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BAD’s future growth? Take a look at our free research report of analyst consensus for BAD’s outlook.
- Financial Health: Are BAD’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.
- 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 email@example.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.
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