Investors with a long-term horizong may find it valuable to assess Finning International Inc.'s (TSE:FTT) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Finning International is currently performing.
How Did FTT's Recent Performance Stack Up Against Its Past?
FTT's trailing twelve-month earnings (from 31 December 2018) of CA$232m has increased by 7.4% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -10%, indicating the rate at which FTT is growing has accelerated. What's the driver of this growth? Let's see if it is merely a result of industry tailwinds, or if Finning International has seen some company-specific growth.
In terms of returns from investment, Finning International has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 5.2% is below the CA Trade Distributors industry of 5.4%, indicating Finning International's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Finning International’s debt level, has increased over the past 3 years from 9.4% to 12%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 80% to 73% over the past 5 years.
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. Companies that have performed well in the past, such as Finning International gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. 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 31 December 2018. This may not be consistent with full year annual report figures.
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