Should IGM Financial Inc.'s (TSE:IGM) Recent Earnings Decline Worry You?
For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at IGM Financial Inc.'s (TSX:IGM) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
View our latest analysis for IGM Financial
How Did IGM's Recent Performance Stack Up Against Its Past?
IGM's trailing twelve-month earnings (from 31 December 2019) of CA$747m has declined by -2.7% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -1.5%, indicating the rate at which IGM is growing has slowed down. What could be happening here? 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, IGM Financial has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 6.7% exceeds the CA Capital Markets industry of 4.7%, indicating IGM Financial has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for IGM Financial’s debt level, has increased over the past 3 years from 7.8% to 9.8%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. I recommend you continue to research IGM Financial to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for IGM’s future growth? Take a look at our free research report of analyst consensus for IGM’s outlook.
Financial Health: Are IGM’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 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
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