When Intact Financial Corporation (TSX:IFC) announced its most recent earnings (30 September 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Intact Financial has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see IFC has performed.
Were IFC's earnings stronger than its past performances and the industry?
IFC's trailing twelve-month earnings (from 30 September 2019) of CA$713m has increased by 8.7% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -0.08%, indicating the rate at which IFC is growing has accelerated. What's the driver of this growth? Let's take a look at whether it is merely due to an industry uplift, or if Intact Financial has experienced some company-specific growth.
In terms of returns from investment, Intact Financial has fallen short of achieving a 20% return on equity (ROE), recording 9.3% instead. However, its return on assets (ROA) of 2.7% exceeds the CA Insurance industry of 0.9%, indicating Intact Financial has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Intact Financial’s debt level, has declined over the past 3 years from 8.8% to 7.6%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 22% to 25% over the past 5 years.
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 recommend you continue to research Intact Financial to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for IFC’s future growth? Take a look at our free research report of analyst consensus for IFC’s outlook.
- Financial Health: Are IFC’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 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 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.
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