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Does Restaurant Brands New Zealand Limited’s (NZSE:RBD) 37% Earnings Growth Make It An Outperformer?

When Restaurant Brands New Zealand Limited (NZSE:RBD) released its most recent earnings update (26 February 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Restaurant Brands New Zealand’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not RBD actually performed well. Below is a quick commentary on how I see RBD has performed.

View our latest analysis for Restaurant Brands New Zealand

Could RBD beat the long-term trend and outperform its industry?

RBD’s trailing twelve-month earnings (from 26 February 2018) of NZ$35m has jumped 37% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 12%, indicating the rate at which RBD is growing has accelerated. What’s enabled this growth? Well, let’s take a look at if it is solely because of an industry uplift, or if Restaurant Brands New Zealand has seen some company-specific growth.

NZSE:RBD Income Statement Export October 18th 18

In terms of returns from investment, Restaurant Brands New Zealand has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 9.1% exceeds the NZ Hospitality industry of 7.3%, indicating Restaurant Brands New Zealand has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Restaurant Brands New Zealand’s debt level, has declined over the past 3 years from 31% to 15%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 25% to 83% over the past 5 years.

What does this mean?

Restaurant Brands New Zealand’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 suggest you continue to research Restaurant Brands New Zealand to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for RBD’s future growth? Take a look at our free research report of analyst consensus for RBD’s outlook.
  2. Financial Health: Are RBD’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 26 February 2018. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.