Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Finning International Inc’s (TSE:FTT) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
How Did FTT’s Recent Performance Stack Up Against Its Past?
FTT’s trailing twelve-month earnings (from 30 June 2018) of CA$271.0m has jumped 84.4% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -15.4%, indicating the rate at which FTT is growing has accelerated. What’s enabled this growth? Well, let’s take a look at if it is only due to industry tailwinds, or if Finning International has seen some company-specific growth.
Even though both top-line and bottom-line growth rates in the last couple of years were on average negative, earnings were more so. While this brought about a margin contraction, it has cushioned Finning International’s earnings contraction. Eyeballing growth from a sector-level, the Canadian trade distributors industry has been growing its average earnings by double-digit 28.1% in the prior twelve months, . This is a turnaround from a volatile drop of -4.4% in the last couple of years. This growth is a median of profitable companies of 9 Trade Distributors companies in CA including Taiga Building Products, Cervus Equipment and Hardwoods Distribution. This suggests that, in the recent industry expansion, Finning International is capable of amplifying this to its advantage.
In terms of returns from investment, Finning International has fallen short of achieving a 20% return on equity (ROE), recording 12.8% instead. However, its return on assets (ROA) of 6.2% exceeds the CA Trade Distributors industry of 5.8%, indicating Finning International has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Finning International’s debt level, has declined over the past 3 years from 9.8% to 9.6%.
What does this mean?
Finning International’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Finning International has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Finning International to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FTT’s future growth? Take a look at our free research report of analyst consensus for FTT’s outlook.
- Financial Health: Are FTT’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 firstname.lastname@example.org.