Measuring Pennon Group Plc's (LSE:PNN) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess PNN's recent performance announced on 30 September 2019 and compare these figures to its historical trend and industry movements.
How PNN fared against its long-term earnings performance and its industry
PNN's trailing twelve-month earnings (from 30 September 2019) of UK£233m has increased by 7.5% 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 16%, indicating the rate at which PNN is growing has slowed down. What could be happening here? Well, let's look at what's going on with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Pennon Group has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 4.7% exceeds the GB Water Utilities industry of 4.1%, indicating Pennon Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Pennon Group’s debt level, has increased over the past 3 years from 5.2% to 5.7%.
What does this mean?
Pennon 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 Pennon Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PNN’s future growth? Take a look at our free research report of analyst consensus for PNN’s outlook.
- Financial Health: Are PNN’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 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.
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