After looking at Ritchie Bros. Auctioneers Incorporated's (NYSE:RBA) latest earnings announcement (30 June 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
Were RBA's earnings stronger than its past performances and the industry?
RBA's trailing twelve-month earnings (from 30 June 2019) of US$131m has jumped 19% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 0.4%, indicating the rate at which RBA is growing has accelerated. What's the driver of this growth? Let's see if it is solely attributable to an industry uplift, or if Ritchie Bros. Auctioneers has experienced some company-specific growth.
In terms of returns from investment, Ritchie Bros. Auctioneers has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 7.3% exceeds the US Commercial Services industry of 6.5%, indicating Ritchie Bros. Auctioneers has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Ritchie Bros. Auctioneers’s debt level, has declined over the past 3 years from 18% to 12%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 22% to 85% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Ritchie Bros. Auctioneers gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Ritchie Bros. Auctioneers to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RBA’s future growth? Take a look at our free research report of analyst consensus for RBA’s outlook.
- Financial Health: Are RBA’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.
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