After reading Breedon Group plc's (AIM:BREE) latest earnings update (30 June 2019), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether BREE has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
Commentary On BREE's Past Performance
BREE's trailing twelve-month earnings (from 30 June 2019) of UK£73m has jumped 33% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 31%, indicating the rate at which BREE is growing has accelerated. What's the driver of this growth? Let's take a look at if it is merely attributable to an industry uplift, or if Breedon Group has experienced some company-specific growth.
In terms of returns from investment, Breedon Group has fallen short of achieving a 20% return on equity (ROE), recording 9.1% instead. Furthermore, its return on assets (ROA) of 6.0% is below the GB Basic Materials industry of 8.8%, indicating Breedon Group's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Breedon Group’s debt level, has declined over the past 3 years from 15% to 8.6%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 38% to 39% over the past 5 years.
What does this mean?
Breedon Group's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Breedon Group has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Breedon Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BREE’s future growth? Take a look at our free research report of analyst consensus for BREE’s outlook.
- Financial Health: Are BREE’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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