For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Etsy, Inc. (NASDAQ:ETSY) useful as an attempt to give more color around how Etsy is currently performing.
Did ETSY perform worse than its track record and industry?
ETSY's trailing twelve-month earnings (from 31 December 2018) of US$77m has declined by -5.2% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 57%, indicating the rate at which ETSY is growing has slowed down. Why is this? Well, let’s take a look at what’s going on with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Etsy has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. However, its return on assets (ROA) of 10% exceeds the US Online Retail industry of 6.8%, indicating Etsy has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Etsy’s debt level, has increased over the past 3 years from 0.4% to 11%.
What does this mean?
Etsy's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. You should continue to research Etsy to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ETSY’s future growth? Take a look at our free research report of analyst consensus for ETSY’s outlook.
- Financial Health: Are ETSY’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 31 December 2018. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.