How Does XP Power Limited’s (LON:XPP) Earnings Growth Stack Up Against Industry Performance?
When XP Power Limited’s (LON:XPP) announced its latest earnings (30 June 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were XP Power’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not XPP actually performed well. Below is a quick commentary on how I see XPP has performed.
Check out our latest analysis for XP Power
How XPP fared against its long-term earnings performance and its industry
XPP’s trailing twelve-month earnings (from 30 June 2018) of UK£32m has jumped 43% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 11%, indicating the rate at which XPP is growing has accelerated. What’s enabled this growth? Well, let’s take a look at if it is only because of an industry uplift, or if XP Power has seen some company-specific growth.
In terms of returns from investment, XP Power has invested its equity funds well leading to a 26% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 15% exceeds the GB Electrical industry of 9.1%, indicating XP Power has used its assets more efficiently. However, its return on capital (ROC), which also accounts for XP Power’s debt level, has declined over the past 3 years from 28% to 20%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 19% to 47% over the past 5 years.
What does this mean?
XP Power’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as XP Power gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research XP Power to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for XPP’s future growth? Take a look at our free research report of analyst consensus for XPP’s outlook.
Financial Health: Are XPP’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 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.
