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Should Joyce Corporation Ltd's (ASX:JYC) Recent Earnings Decline Worry You?

Simply Wall St

Measuring Joyce Corporation Ltd's (ASX:JYC) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess JYC's recent performance announced on 30 June 2019 and compare these figures to its historical trend and industry movements.

See our latest analysis for Joyce

Commentary On JYC's Past Performance

JYC's trailing twelve-month earnings (from 30 June 2019) of AU$3.4m has declined by -2.0% 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 48%, indicating the rate at which JYC is growing has slowed down. What could be happening here? Well, let's look at what's occurring with margins and whether the rest of the industry is feeling the heat.

ASX:JYC Income Statement, December 6th 2019
ASX:JYC Income Statement, December 6th 2019

In terms of returns from investment, Joyce has invested its equity funds well leading to a 25% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 6.7% is below the AU Specialty Retail industry of 8.2%, indicating Joyce's are utilized less efficiently. Furthermore, its return on capital (ROC), which also accounts for Joyce’s debt level, has declined over the past 3 years from 20% to 15%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 31% to 38% over the past 5 years.

What does this mean?

Though Joyce's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. You should continue to research Joyce to get a better picture of the stock by looking at:

  1. Financial Health: Are JYC’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.

  2. Valuation: What is JYC 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 JYC is currently mispriced by the market.

  3. 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.

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.

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. Thank you for reading.