U.S. Markets closed

Does Breedon Group plc's (LON:BREE) Past Performance Indicate A Stronger Future?

Simply Wall St

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.

See our latest analysis for Breedon Group

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.

AIM:BREE Income Statement, October 13th 2019

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:

  1. 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.
  2. 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.
  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 June 2019. This may not be consistent with full year annual report figures.

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.

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. Thank you for reading.