After looking at Vita Group Limited's (ASX:VTG) latest earnings update (30 June 2019), I found it helpful to revisit the company's performance in the past couple of years and compare this against the latest numbers. 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 an important aspect. In this article I briefly touch on my key findings.
How Well Did VTG Perform?
VTG's trailing twelve-month earnings (from 30 June 2019) of AU$24m has jumped 11% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.4%, indicating the rate at which VTG is growing has accelerated. How has it been able to do this? Let's see whether it is solely owing to an industry uplift, or if Vita Group has experienced some company-specific growth.
In terms of returns from investment, Vita Group has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 12% exceeds the AU Specialty Retail industry of 6.9%, indicating Vita Group has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Vita Group’s debt level, has declined over the past 3 years from 57% to 22%.
What does this mean?
Though Vita Group's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Vita Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Vita Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for VTG’s future growth? Take a look at our free research report of analyst consensus for VTG’s outlook.
- Financial Health: Are VTG’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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