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After reading HomeServe plc’s (LON:HSV) most recent earnings announcement (30 September 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. 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.
How HSV fared against its long-term earnings performance and its industry
HSV’s trailing twelve-month earnings (from 30 September 2018) of UK£96m has jumped 30% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 28%, indicating the rate at which HSV is growing has accelerated. What’s the driver of this growth? Let’s see whether it is merely a result of industry tailwinds, or if HomeServe has seen some company-specific growth.
In terms of returns from investment, HomeServe has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 7.4% exceeds the GB Commercial Services industry of 4.6%, indicating HomeServe has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for HomeServe’s debt level, has increased over the past 3 years from 15% to 15%.
What does this mean?
HomeServe’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While HomeServe 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 HomeServe to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HSV’s future growth? Take a look at our free research report of analyst consensus for HSV’s outlook.
- Financial Health: Are HSV’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 email@example.com.