Measuring Cervus Equipment Corporation's (TSX:CERV) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess CERV's recent performance announced on 30 June 2019 and compare these figures to its historical trend and industry movements.
Commentary On CERV's Past Performance
CERV's trailing twelve-month earnings (from 30 June 2019) of CA$19m has declined by -7.9% 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 24%, indicating the rate at which CERV is growing has slowed down. Why could this be happening? Let's examine what's occurring with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, Cervus Equipment has fallen short of achieving a 20% return on equity (ROE), recording 8.0% instead. Furthermore, its return on assets (ROA) of 4.3% is below the CA Trade Distributors industry of 4.3%, indicating Cervus Equipment's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Cervus Equipment’s debt level, has declined over the past 3 years from 9.2% to 8.6%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 98% to 111% over the past 5 years.
What does this mean?
Cervus Equipment'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 suggest you continue to research Cervus Equipment to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CERV’s future growth? Take a look at our free research report of analyst consensus for CERV’s outlook.
- Financial Health: Are CERV’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 June 2019. This may not be consistent with full year annual report figures.
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