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Was Etsy, Inc.'s (NASDAQ:ETSY) Earnings Growth Better Than The Industry's?

Simply Wall St

When Etsy, Inc. (NasdaqGS:ETSY) released its most recent earnings update (30 June 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Etsy's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not ETSY actually performed well. Below is a quick commentary on how I see ETSY has performed.

See our latest analysis for Etsy

How Well Did ETSY Perform?

ETSY's trailing twelve-month earnings (from 30 June 2019) of US$111m has jumped 28% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 65%, indicating the rate at which ETSY is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and whether the entire industry is feeling the heat.

NasdaqGS:ETSY Income Statement, October 25th 2019

In terms of returns from investment, Etsy has invested its equity funds well leading to a 25% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 12% exceeds the US Online Retail industry of 5.0%, 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 3.8% to 13%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. While Etsy has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. You should continue to research Etsy to get a better picture of the stock by looking at:

  1. 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.
  2. 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.
  3. 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.

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 editorial-team@simplywallst.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.