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After reading FirstCash, Inc.'s (NASDAQ:FCFS) latest earnings update (31 December 2018), 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 FCFS has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
Were FCFS's earnings stronger than its past performances and the industry?
FCFS's trailing twelve-month earnings (from 31 December 2018) of US$153m has increased by 6.5% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 17%, indicating the rate at which FCFS is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, FirstCash has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 8.5% exceeds the US Consumer Finance industry of 5.3%, indicating FirstCash has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for FirstCash’s debt level, has declined over the past 3 years from 16% to 12%.
What does this mean?
While past data is useful, it 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 suggest you continue to research FirstCash to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for FCFS’s future growth? Take a look at our free research report of analyst consensus for FCFS’s outlook.
Financial Health: Are FCFS’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 31 December 2018. 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 firstname.lastname@example.org. 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.