For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Skellerup Holdings Limited (NZSE:SKL) useful as an attempt to give more color around how Skellerup Holdings is currently performing.
Did SKL beat its long-term earnings growth trend and its industry?
SKL's trailing twelve-month earnings (from 30 June 2019) of NZ$29m has increased by 6.5% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -5.0%, indicating the rate at which SKL is growing has accelerated. What's enabled this growth? Well, let’s take a look at if it is only attributable to industry tailwinds, or if Skellerup Holdings has experienced some company-specific growth.
In terms of returns from investment, Skellerup Holdings has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 12% exceeds the NZ Machinery industry of 5.4%, indicating Skellerup Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Skellerup Holdings’s debt level, has increased over the past 3 years from 15% to 18%.
What does this mean?
Though Skellerup Holdings's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Skellerup Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SKL’s future growth? Take a look at our free research report of analyst consensus for SKL’s outlook.
- Financial Health: Are SKL’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 2019. This may not be consistent with full year annual report figures.
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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.