Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess CIMIC Group Limited’s (ASX:CIM) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
How CIM fared against its long-term earnings performance and its industry
CIM’s trailing twelve-month earnings (from 30 September 2018) of AU$765m has jumped 15% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 25%, indicating the rate at which CIM is growing has slowed down. Why could this be happening? Well, let’s examine what’s transpiring with margins and if the entire industry is feeling the heat.
In terms of returns from investment, CIMIC Group has invested its equity funds well leading to a 36% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 8.9% is below the AU Construction industry of 9.3%, indicating CIMIC Group’s are utilized less efficiently. Though, its return on capital (ROC), which also accounts for CIMIC Group’s debt level, has increased over the past 3 years from 4.2% to 38%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 99% to 43% over the past 5 years.
What does this mean?
CIMIC Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While CIMIC Group has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research CIMIC Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CIM’s future growth? Take a look at our free research report of analyst consensus for CIM’s outlook.
- Financial Health: Are CIM’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 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.