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How Does AVJennings Limited's (ASX:AVJ) Earnings Growth Stack Up Against Industry Performance?

Simply Wall St

Examining AVJennings Limited's (ASX:AVJ) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess AVJ's latest performance announced on 31 December 2019 and weigh these figures against its longer term trend and industry movements.

Check out our latest analysis for AVJennings

Could AVJ beat the long-term trend and outperform its industry?

AVJ's trailing twelve-month earnings (from 31 December 2019) of AU$24m has jumped 38% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -10%, indicating the rate at which AVJ is growing has accelerated. What's the driver of this growth? Well, let’s take a look at if it is only attributable to industry tailwinds, or if AVJennings has seen some company-specific growth.

ASX:AVJ Income Statement April 21st 2020
ASX:AVJ Income Statement April 21st 2020

In terms of returns from investment, AVJennings has fallen short of achieving a 20% return on equity (ROE), recording 6.0% instead. Furthermore, its return on assets (ROA) of 3.5% is below the AU Real Estate industry of 4.0%, indicating AVJennings's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for AVJennings’s debt level, has declined over the past 3 years from 8.5% to 5.4%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 35% to 45% over the past 5 years.

What does this mean?

AVJennings's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. You should continue to research AVJennings to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for AVJ’s future growth? Take a look at our free research report of analyst consensus for AVJ’s outlook.

  2. Financial Health: Are AVJ’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 31 December 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.