Understanding how Lifestyle Communities Limited (ASX:LIC) is performing as a company requires looking at more than just a years' earnings. Today I will run you through a basic sense check to gain perspective on how Lifestyle Communities is doing by comparing its latest earnings with its long-term trend as well as the performance of its real estate industry peers.
Were LIC's earnings stronger than its past performances and the industry?
LIC's trailing twelve-month earnings (from 30 June 2019) of AU$55m has increased by 4.5% 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 34%, indicating the rate at which LIC is growing has slowed down. Why could this be happening? Well, let's look at what's transpiring with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, Lifestyle Communities has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 12% exceeds the AU Real Estate industry of 6.1%, indicating Lifestyle Communities has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Lifestyle Communities’s debt level, has increased over the past 3 years from 5.0% to 6.0%.
What does this mean?
Though Lifestyle Communities'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 Lifestyle Communities to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for LIC’s future growth? Take a look at our free research report of analyst consensus for LIC’s outlook.
- Financial Health: Are LIC’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 firstname.lastname@example.org. 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.