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When ITV plc (LON:ITV) announced its most recent earnings (31 December 2018), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how ITV performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see ITV has performed.
Did ITV's recent earnings growth beat the long-term trend and the industry?
ITV's trailing twelve-month earnings (from 31 December 2018) of UK£466m has jumped 14% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 0.8%, indicating the rate at which ITV is growing has accelerated. What's the driver of this growth? Well, let’s take a look at if it is only due to an industry uplift, or if ITV has seen some company-specific growth.
In terms of returns from investment, ITV has invested its equity funds well leading to a 55% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 14% exceeds the GB Media industry of 5.1%, indicating ITV has used its assets more efficiently. However, its return on capital (ROC), which also accounts for ITV’s debt level, has declined over the past 3 years from 36% to 31%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 47% to 123% over the past 5 years.
What does this mean?
Though ITV's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as ITV gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research ITV to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ITV’s future growth? Take a look at our free research report of analyst consensus for ITV’s outlook.
- Financial Health: Are ITV’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 2018. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.