After reading Intact Financial Corporation’s (TSE:IFC) most recent earnings announcement (30 June 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 pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Intact Financial’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Despite a decline, did IFC underperform the long-term trend and the industry?
IFC’s trailing twelve-month earnings (from 30 June 2018) of CA$633m has declined by -5.0% 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 5.4%, indicating the rate at which IFC is growing has slowed down. Why is this? Well, let’s look at what’s occurring with margins and if the entire industry is experiencing the hit as well.
In terms of returns from investment, Intact Financial has fallen short of achieving a 20% return on equity (ROE), recording 8.6% instead. However, its return on assets (ROA) of 2.6% exceeds the CA Insurance industry of 1.0%, indicating Intact Financial has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Intact Financial’s debt level, has declined over the past 3 years from 13% to 6.6%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 23% to 29% over the past 5 years.
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 Intact Financial to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for IFC’s future growth? Take a look at our free research report of analyst consensus for IFC’s outlook.
- Financial Health: Are IFC’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 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.