Does Victrex plc’s (LON:VCT) 20.61% Earnings Growth Reflect The Long-Term Trend?
Measuring Victrex plc’s (LSE:VCT) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess VCT’s recent performance announced on 30 September 2017 and compare these figures to its historical trend and industry movements. See our latest analysis for Victrex
Did VCT beat its long-term earnings growth trend and its industry?
I like to use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This technique enables me to assess many different companies on a more comparable basis, using the latest information. For Victrex, its latest trailing-twelve-month earnings is UK£99.50M, which, relative to the prior year’s level, has increased by 20.61%. Given that these values may be somewhat myopic, I have computed an annualized five-year figure for Victrex’s net income, which stands at UK£78.48M This means that, generally, Victrex has been able to increasingly improve its bottom line over the past couple of years as well.
How has it been able to do this? Well, let’s take a look at whether it is solely a result of industry tailwinds, or if Victrex has experienced some company-specific growth. The hike in earnings seems to be supported by a strong top-line increase outstripping its growth rate of costs. Though this has led to a margin contraction, it has made Victrex more profitable. Looking at growth from a sector-level, the UK chemicals industry has been growing its average earnings by double-digit 38.15% over the prior year, and a more subdued 2.98% over the past five. This means any tailwind the industry is deriving benefit from, Victrex has not been able to realize the gains unlike its average peer.
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 Victrex gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Victrex to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for VCT’s future growth? Take a look at our free research report of analyst consensus for VCT’s outlook.
Financial Health: Is VCT’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 2017. This may not be consistent with full year annual report figures.
To help readers see pass 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.
