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Does Babcock International Group PLC's (LON:BAB) Past Performance Indicate A Stronger Future?

Simply Wall St

Assessing Babcock International Group PLC's (LSE:BAB) performance as a company requires looking at more than just a years' earnings data. Below, I will run you through a simple sense check to build perspective on how Babcock International Group is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its commercial services industry peers.

See our latest analysis for Babcock International Group

How Did BAB's Recent Performance Stack Up Against Its Past?

BAB's trailing twelve-month earnings (from 30 September 2019) of UK£271m has jumped 13% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 0.2%, indicating the rate at which BAB is growing has accelerated. What's the driver of this growth? Let's see if it is only a result of an industry uplift, or if Babcock International Group has experienced some company-specific growth.

LSE:BAB Income Statement, November 30th 2019

In terms of returns from investment, Babcock International Group has fallen short of achieving a 20% return on equity (ROE), recording 9.6% instead. Furthermore, its return on assets (ROA) of 4.5% is below the GB Commercial Services industry of 4.9%, indicating Babcock International Group's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Babcock International Group’s debt level, has declined over the past 3 years from 7.7% to 6.5%.

What does this mean?

Though Babcock International Group's past data is helpful, it is only one aspect of my investment thesis. While Babcock International Group has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Babcock International Group to get a more holistic view of the stock by looking at:

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

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