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After reading FirstService Corporation’s (TSE:FSV) latest earnings update (31 December 2018), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether FSV has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
How FSV fared against its long-term earnings performance and its industry
FSV’s trailing twelve-month earnings (from 31 December 2018) of US$66m has jumped 24% 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 42%, indicating the rate at which FSV is growing has slowed down. Why could this be happening? Well, let’s look at what’s transpiring with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, FirstService has invested its equity funds well leading to a 23% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 7.8% exceeds the CA Real Estate industry of 4.7%, indicating FirstService has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for FirstService’s debt level, has increased over the past 3 years from 15% to 17%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 90% to 86% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research FirstService to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FSV’s future growth? Take a look at our free research report of analyst consensus for FSV’s outlook.
- Financial Health: Are FSV’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.
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.