In this commentary, I will examine Jersey Electricity plc's (LSE:JEL) latest earnings update (30 September 2019) and compare these figures against its performance over the past couple of years, as well as how the rest of the electric utilities industry performed. As an investor, I find it beneficial to assess JEL’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
How Did JEL's Recent Performance Stack Up Against Its Past?
JEL's trailing twelve-month earnings (from 30 September 2019) of UK£12m has declined by -2.8% 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 7.8%, indicating the rate at which JEL is growing has slowed down. Why is this? Well, let's look at what's transpiring with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, Jersey Electricity has fallen short of achieving a 20% return on equity (ROE), recording 5.9% instead. However, its return on assets (ROA) of 4.4% exceeds the GB Electric Utilities industry of 4.0%, indicating Jersey Electricity has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Jersey Electricity’s debt level, has declined over the past 3 years from 5.9% to 5.5%.
What does this mean?
Jersey Electricity's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors affecting its business. I recommend you continue to research Jersey Electricity to get a better picture of the stock by looking at:
- Financial Health: Are JEL’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.
- Valuation: What is JEL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether JEL is currently mispriced by the market.
- 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 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 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.
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