After looking at Hollywood Bowl Group plc’s (LON:BOWL) latest earnings announcement (30 September 2018), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
Were BOWL’s earnings stronger than its past performances and the industry?
BOWL’s trailing twelve-month earnings (from 30 September 2018) of UK£19m has increased by 2.9% 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 38%, indicating the rate at which BOWL is growing has slowed down. Why could this be happening? Well, let’s examine what’s going on with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, Hollywood Bowl Group has fallen short of achieving a 20% return on equity (ROE), recording 20% instead. However, its return on assets (ROA) of 13% exceeds the GB Hospitality industry of 6.4%, indicating Hollywood Bowl Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Hollywood Bowl Group’s debt level, has increased over the past 3 years from 12% to 19%.
What does this mean?
Though Hollywood Bowl Group’s past data is helpful, it is only one aspect of my investment thesis. While Hollywood Bowl Group 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 Hollywood Bowl Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BOWL’s future growth? Take a look at our free research report of analyst consensus for BOWL’s outlook.
- Financial Health: Are BOWL’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 September 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.