For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Breville Group Limited (ASX:BRG) useful as an attempt to give more color around how Breville Group is currently performing.
Did BRG's recent earnings growth beat the long-term trend and the industry?
BRG's trailing twelve-month earnings (from 30 June 2019) of AU$67m has jumped 15% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 7.6%, indicating the rate at which BRG is growing has accelerated. What's the driver of this growth? Let's take a look at if it is only because of industry tailwinds, or if Breville Group has seen some company-specific growth.
In terms of returns from investment, Breville Group has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the AU Consumer Durables industry of 8.6%, indicating Breville Group has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Breville Group’s debt level, has declined over the past 3 years from 28% to 26%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 11% to 15% over the past 5 years.
What does this mean?
Breville Group's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Breville Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BRG’s future growth? Take a look at our free research report of analyst consensus for BRG’s outlook.
- Financial Health: Are BRG’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.
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 email@example.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.